Nifty, Sensex tank, Asian markets crash after Fitch cuts US credit rating from AAA to AA+
时间:2024-06-26 11:46:52 阅读(143)
Indian equities tanked almost 1%, while Asia-Pacific stocks faced a bloodbath, as global markets reeled from the impact of Fitch Ratings cutting the United States’ credit rating from the top-rated AAA to AA+. NSE Nifty 50 and Sensex traded 0.6% lower, while major Asian indices such as South Korea’s KOSPI, Japan’s Nikkei 225 and Hong Kong’s Hang Seng crashed over 1.5% each. The sovereign rating was stripped from the US on account of its increasing deficits and slow disintegration of governance, which impeded the government’s abilities to repay its dues.Fitch’s downgrade of US credit rating
The downgrade came two months after the incumbent administration and the Republicans agreed to suspend the government’s debt ceiling in a deal that came down to the wire. Fitch said the tax cuts and spending initiatives, as well as numerous other economic shocks, led to the budget deficits ballooning, and rising entitlement costs are yet to be addressed. Back in the year 2011, S&P Global Ratings’ in 2011, downgraded the US. Today, Moody’s Investors Service is the only major credit agency that retains the United States’ AAA rating.
The impact on the Indian markets will be short-lived as the market pivots to focus on other factors such as quarterly earnings, crude prices and the upcoming RBI policy. However, global markets have been heated and investors may look for reasons to correct it, said Mukesh Kochar, National Head-Wealth, AUM Capital.
An exception to the unanimous agreement, Deepak Jasani, Head of Retail Research, HDFC Securities, believes that the downgrade can have a significant impact on global risk appetite. In 2011, when S&P downgraded US ratings, Dow Jones fell by a high single digit percent and Indian markets, following America’s cues, fell by a larger proportion, taking longer to recover as well. “Though the current situation is vastly different from that in 2011, directionally we expect a similar behavior in the global markets though the quantum of fall may be different. Negative global risk appetite changes result in withdrawal of funds from most markets,” he added.
FII impactThe cut is unlikely to affect FII inflows, said Nitin Agrawal, CEO, Torus Oro PMS. While emerging markets could see a short-term fall as investors take flight to safer assets, the impact will be much lower. Manish Chowdhury, Head of Research, StoxBox added that it would be premature to arrive at a decision on FII flows, as various factors, such as the political, economic and monetary policy landscape, valuations, the structural market strength and growth opportunities, are considered in conflation.
What should those investing in foreign markets do?Indian investors investing abroad should focus on tracking underlying economic factors, like US fiscal debt, inflation and whether the US economy is able to sustain the growth without taking this downgrade from Fitch into consideration, said Nitin Agrawal.
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However, he believes that the impact on the Indian market is going to be temporary since there could be some short-term impact on flows into Indian equity markets. But since the Indian economy is on a strong wicket and will continue to remain resilient.
“Improved fiscal situation, controlled current deficit, stable interest scenario combined with good corporate earnings should lead to limited impact on the Indian bond market and equity market too,” he added.
The midcap and smallcap indices took a bigger knock with the BSE MidCap fell 2.51%, while BSE SmallCap index dived 4.18%. According to Amnish Aggarwal, head, research, Prabhudas Lilladher, the valuations were already high and some correction was expected. “If the situation sustains as it is then further correction can’t be ruled out,” Aggarwal said.
Telecommunication and industrials indices were the top laggards with BSE Telecommunication declining 3.82%, followed by BSE Industrials falling 3.26%. JSW Steel (-2.99%), Tata Steel (-2.52%) and Tata Consultancy Services (-2.44%) were the top losers of Sensex.
Surprisingly, both foreign portfolio investors and domestic institutional investors were net buyers today. While, FPIs net bought shares worth Rs 252.25 crore, DIIs have purchased shares worth Rs 1,111.84 crore, as per provisional data from exchanges.
Calling this a “normal phenomena” Pankaj Pandey, head, research, ICICI Direct said, “I will not really give too much weight to a single day buying figure. Amid concerns of elevated interest rate and geopolitical tensions, in a typical market cycle, 8-10% correction is possible at any point in time.”
The brunt of geopolitical conflict, elevated interest rates and rising crude oil prices was also felt by other Asian- Pacific markets. Jakarta Composite Index lost 1.57% followed by Shanghai Composite Index and PSEi, which fell 1.47% and 0.89%, respectively. Nikkei and KOSPI declined 0.83% and 0.76%.
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