Following six straight weeks of rise, Sensex and Nifty spooked by sharp depreciation of rupee, higher crude oil prices and weak global cues, shed 255 and 91 points to close at 38,390 and 11,589 respectively.
With fuel prices touching all-time highs, fears of inflation are back. The unabated rise, which consumers are now urging the Centre to curb, has also sparked political fight between the government and the opposition. Market players expect changes in pricing policy ahead of state elections.
Centre had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47 a litre in nine instalments between November 2014 and January 2016 to shore up finances as global crude oil prices fell, but then cut the tax just once in October 2017 by Rs 2 a litre. This led to its excise collections from petro goods more than doubling in the last four years from Rs 99,184 crores in 2014-15 to Rs 2,29,019 crores in 2017-18.
The week also saw rupee hit a historic low of 72.10 against the dollar. Losses in the rupee have accelerated amid fears of an emerging market contagion. Analysts feel that the dip is a bit of catch-up to other emerging market currencies. Observers think rupee will stabilise in next few weeks due to likely intervention. However, if it falls more than expectations, the depreciation cost could outweigh benefits.
Near term trend will be dictated by domestic macro data, FII and DII activity, movement of rupee, crude oil price movement and global cues. For the week ahead, chartists predict trading range of 37,850-39,000 and 11,400-11,800 for the indices.
