Indian shares open low amid US debt ceiling talks
US debt ceiling could cause 'economic catastrophe' ?
The Indian shares were off to a muted start on Monday, May 22, after the US debt ceiling talks which were paused on Friday, May 19. Wall Street equities closed lower on Friday on reports that the U.S. debt ceiling negotiations had reached an impasse.
Understanding the ‘Debt Ceiling’
The debt ceiling determines how much money the government can borrow for its expenses. After the borrowing cap is reached, no further money can be raised for the government. In such a scenario, the only way a government can raise funding is via tax revenues.
US debt ceiling
The US has hit its borrowing limit, also referred to as the ‘debt ceiling’, which in turn has fuelled fears of putting global markets in instability and setting off a budgetary battle in Congress. Presently, the US government borrowing equates to around 120 per cent of the nation's yearly economic output.
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The looming debt ceiling crisis has investors worried, as any default will have a major impact on the international financial markets. Analysts have warned that a failure to lift the US debt ceiling could trigger a default and a spike in interest rates and cause an ‘economic catastrophe’.
Indian stock market
India’s NSE stock futures listed on the Singapore Exchange were down to0.01% at 18,201.95 as of 9:15 a.m. IST on Monday, May 22, while the benchmark S&P BSE Sensex, BSESN fell 0.11% to 61,660.99.
WATCH |What is the US debt ceiling & what happens if it isn’t raised?
As reported by Reuters, Indian shares snapped three straight sessions of losses on Friday, aided by quarterly earnings and persistent foreign institutional buying. Analysts expect the Nifty benchmark to consolidate in the 18,050-18,450 range.
Short-term trend remains choppy
Commenting on the matter Nagaraj Shetti, technical research analyst at HDFC securities said that “the short-term trend for the Nifty remains choppy”. He further added that “the emergence of buying interest on Friday raises hopes for an upside bounce in the market.”
However, the head of retail research at the HDFC securities, Deepak Jasani added that “the overall mood in the markets in the near term will be decided by Foreign institutional investors (FIIs) flows and developments on the U.S. debt default situation.”
As per provisional data from the National Stock Exchange, the Foreign institutional investors (FIIs) snapped a 16-session buying streak on Friday, May 19 selling 1.13 billion rupees ($13.8 million) of shares.
(with inputs from agencies)
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