Stocks slump 2%, rupee breaches 94/$ as foreign investors rush to safe havens, Pg17

Key Highlights:

• The rupee fell past 94 per dollar due to foreign investors selling debt and stocks.
• On Friday, the Nifty and Sensex fell by 2.1% and 2.3%, respectively.
• Foreign portfolio investors (FPIs) net sold Indian shares worth $12.3 billion in March.
• Goldman Sachs downgraded Indian stocks to ‘marketweight’ and cut Nifty's 12-month target to 25,900.

Detailed Insights:

• The stock market decline occurred after a brief rally earlier in the week, indicating market instability due to geopolitical tensions and high energy prices.
• FPI outflows in March totaled $13.3 billion including debt markets, marking the largest monthly outflow ever recorded.
• Goldman Sachs reduced India's earnings growth forecast by 9 percentage points over the next 2 years, projecting 8%/13% for CY26/27.
• Goldman Sachs also lowered India's GDP growth forecast for 2026 by 110 basis points to 5.9%, and expects the RBI to increase the repo rate by 50 bps by the end of 2026.
• Reduced earnings forecasts, despite government measures like GST cuts and income tax rebates, may further negatively impact markets in the short to medium term.

Key Concepts Involved:

• Foreign Portfolio Investors (FPIs): Entities investing in a country's financial assets like stocks and bonds without direct management.
• Repo Rate: The interest rate at which the central bank lends money to commercial banks.
• GDP Growth: The rate at which a country's economy grows from one period to another.