The Indian stock market lost its trillion-dollar tag in terms of total market capitalisation of all listed companies on Tuesday,the first time since May 3,2012,as the rupees decline to record lows against the greenback spooked investors and drove the benchmark index Sensex down about 450 points.
The rupee fell to a record low of 61.80 against the dollar on Tuesday before recovering in the last hour of trade to close at 60.77/$. The currencys steady depreciation has led to fears that RBI,which has been taking steps to tighten liquidity in the past few weeks,might be compelled to tighten liquidity further or raise key policy rates. Strong data on the US services sector also renewed fears that the Fed might taper its $85 billion in monthly bond purchases.
The benchmark BSE Sensex slid 449 points,or 2.3%,to close below the psychological 19,000-mark at 18,733,its lowest close since June 26. The broader 50-share index Nifty was down 143 points,or 2.5%,to 5,542. The Sensex has retreated in nine out of the last 10 sessions,falling 1,569 points or -7.7%. The index is down -3.5% in the year to date. Over 120 companies touched their all-time low on Tuesday.
The rupees fall spooked the markets, said Andrew Holland,CEO,Ambit Investment Advisors,adding that a small number of companies and sectors had been holding up the market in the past few weeks. In the absence of anything to hold on to,any negative news flows seems enough to drag the market down, he said. Banking and realty stocks led the declines. HDFC Bank (-4.1%),ICICI Bank (-4.4%),Yes Bank (-8.3%),IndusInd Bank (-7.6%) and DLF (-5.5%) were among the major losers. Together,stocks like HDFC Bank,ICICI Bank,HDFC,RIL and ITC dragged down the Sensex by 268 points.
Twenty-six out of the 30 BSE shares declined and all of the sectoral indices ended in the red. Breadth in the broader market was weak as well with 1,599 or 67% of the stocks declining on the BSE. Sensexs loss of 449.2 points was the steepest since June 20.
On Tuesday,FIIs bought shares worth $35 million,taking total purchases in August to $178 million and YTD purchases to $12.53 billion. However,FIIs have pared down their purchases in the past couple of months while they bought shares worth $15.1 billion in the first five months of the year,they sold equities worth $2.75 billion in June and July. Domestic institutional investors (DIIs),on the other hand,have sold shares worth $7.95 billion in the year to date.
Among its peers,the performance of Asian indices was mixed on Tuesday. The Hang Seng,Kospi and Straits Times ended in the red,losing anywhere between 1.3% and 0.5% on Tuesday. However,Nikkei 225,Shanghai Composite and Jakarta Composite indices ended the day in the green,with the Nikkei 225 gaining the most at 1%. The major European indices the FTSE 100,DAX and the CAC opened strong but were trading flat at about 5.00 pm IST.