The Virtus Equity & Convertible Income Fund (NIE) is experiencing downward pressure due to a combination of factors affecting its underlying assets. The broader equity markets are facing a downturn, with benchmark indices like the Sensex and Nifty declining for the third consecutive session as of December 18, 2024. This decline is attributed to foreign fund outflows and investor caution ahead of the Federal Reserve's anticipated rate cut announcement. The Fed is expected to reduce the federal funds rate by 25 basis points, which has led to increased market volatility and a cautious stance among investors. Additionally, the rupee's depreciation against the US dollar and the ongoing foreign fund outflows are further dampening investor sentiment in the equity markets.
In the convertible securities space, the market is also reacting to the Federal Reserve's potential adjustments to the reverse repo rate, which could impact short-term interest rates and liquidity conditions. The Fed's move to tweak the reverse repo rate is seen as a step to encourage cash movement off its balance sheet, adding another layer of uncertainty to the market. This potential shift in monetary policy is causing investors to reassess their positions in convertible securities, which are sensitive to interest rate changes.
The NIE ETF is down 2.06% in pre-market hours on Wednesday, December 18, falling to $23.81 as of 6:16 AM ET.