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BSE Sensex plunges 210 pts today,marks biggest weekly fall in five ahead of RBI,US Fed meets

Chary investors bring BSE Sensex down on worries over RBI and US Fed moves next week.

Written by Reuters | Mumbai |
December 13, 2013 4:23:04 pm

Across-the-board selling on BSE Sensex was witnessed today on mounting speculation that the RBI will hike interest rate and the US Fed will trim its economic stimulus next week,which shaved off over 210 points of the index,which posted its biggest weekly loss in five.

Markets Top Gainers,Markets Top Losers

Investor wealth fell by Rs 75,000 crore as overall 1,575 stocks slid out of the 2,610 traded on the BSE. In its fourth straight fall after hitting its lifetime peak on Monday,the BSE Sensex closed at 20,715.58,down 210.03 points or 1 per cent.

ICICI Bank,Bharat Heavy Electricals Ltd (BHEL) and Tata Power were the biggest losers in the 24 stocks that fell in 30-share index.

In 4 days,Sensex has lost 611 points,eroding almost all the gains logged in the recent state election-fuelled rally.

For the week,the barometer shed 280.95 points,the biggest loss since week ended November 8.

Eleven out of the twelve sectoral indices closed in red.

Banking,capital goods and realty shares were among the worst hit after government data yesterday showed retail inflation soared to a nine-month high of 11.24 per cent and factory output shrank 1.8 per cent.

“While growth is stabilising,it remains soft. However,the main concern for the RBI will be inflation,which may well compel it to raise the policy rate again next week by 25 bps,” said HSBC Global Research said.

The 50-share NSE Nifty index fell by 68.65 points,or 1.10 per cent,to 6,168.40 as 43 constituents slipped. Also,SX40 index of MCX-SX shed 117.37 points to end at 12,315.20.

Mirroring the fall in stocks,the rupee fell over 35 paise to 62.19 versus US dollar in late trade today.

Global markets were nervous as investors prepared for the US Federal Reserve’s decision next week on whether to reduce its USD 85-billion-a-month monetary stimulus.

Strong US retail sales and signs of an imminent budget agreement in Congress have cemented fears that the Federal Open Market Committee meeting on December 17-18 might decide to start reducing its monthly financial asset purchases.

Sectorally,the BSE Banking sector index suffered the most by losing 2.25 per cent,followed by BSE Power index by 2.22 per cent,BSE Realty index by 2.10 per cent and BSE Capital goods index by 1.86 per cent.

Dipen Shah,Head- Private Client Group Research,Kotak Securities:

Markets ended weak on Friday and for the week they erased all the gains of Monday,when the markets had risen sharply on assembly election results and the positive US cues. While Fed taper fears led to declines in the middle of the week,strong CPI inflation data further dampened sentiments on Friday.

Global markets are now increasingly expecting Fed to announce some sort of tapering in its ensuing meeting on December 18. Similarly,the probability of a rate hike by RBI on the same day has also risen sharply post the CPI data. We expect the RBI to increase rates by 25bps on December 18. Over the next few months,we feel that,the markets will be more driven by measures,if any,taken by the government on the fiscal side and further movements in interest rates. Expectations about the outcome of the General elections in April – May will also continue to drive markets.

HIGHLIGHTS

* BSE index falls 1 pct; NSE ends 1.1 pct lower

* Indexes erase election gains; back to exit-poll levels

* NSE index options suggest more downside in near term – traders

* Tata Motors cheapest export-based bet in BSE index stocks

Indian shares mark biggest weekly fall in five; RBI,Fed key

(Reuters) Indian shares fell on Friday to mark their biggest weekly fall in nearly a month,as rate-sensitive stocks such as ICICI Bank fell on caution ahead of the central bank’s policy review and the U.S. Federal Reserve meet next week.

Stocks fell for a fourth consecutive day to come to pre-exit poll levels after a pickup in retail inflation to its fastest pace on record was seen forcing India’s central bank to raise interest rates for a third time on Wednesday.

Reserve Bank of India chief Raghuram Rajan said on Thursday he was “very uncomfortable” with the inflation reading.

The fall also tracked global equities which headed for their biggest two-week drop since June amid concerns the Fed could start scaling back its stimulus as early as next week after its two-day meet ends on Wednesday.

“While Fed taper fears led to declines in the middle of the week,CPI inflation data further dampened sentiments on Friday,” said Dipen Shah,head of private client group research at Kotak Securities.

Shah expects the RBI to increase rates by 25 basis points on Dec. 18 when it meets for its monetary policy review.

The benchmark BSE index fell 1 percent,or 210.03 points,to end at 20,715.58. It fell 1.34 percent for the week.

The broader NSE index fell 1.1 percent,or 68.65 points,to end at 6,168.40,marking a weekly fall of 1.46 percent.

The NSE index fell over 1 percent to close below the psychologically important 6,200 level. Both the indexes marked their biggest weekly fall since Nov. 8.

Options traders said the NSE index may fall further,extending four sessions of losses after hitting a record high earlier in the week,as the 6,200 December put option saw a reduction in outstanding positions.

Rate-sensitive stocks slumped after sharply higher food prices drove up retail inflation to 11.24 percent in November raising expectations of a rate hike by the central bank when it meets on Dec. 18.

ICICI Bank Ltd slumped 4.2 percent,while mortgage lender Housing Development Finance Corp Ltd fell 2.4 percent. State Bank of India fell 1.9 percent,while Bank of Baroda Ltd ended 3.2 percent lower.

Capital goods stocks also fell after production at factories,mines and utilities shrank 1.8 percent year-on-year in October.

Larsen & Toubro Ltd fell 1.4 percent,while Bharat Heavy Electricals Ltd fell 4.1 percent.

Elder Pharmaceuticals Ltd slumped 8 percent after rival Torrent Pharmaceuticals Ltd agreed to buy its branded formulations business in India and Nepal for about 20 billion rupees ($324.1 million).

Torrent shares also fell 4.4 percent as cash would be going out of its books of accounts which may weigh on sentiment,dealers said.

Among the gainers,Tata Motors Ltd shares rose 2.8 percent on value buying after falling 8.4 percent over the previous three sessions on worries about higher-than-expected capex at unit Jaguar Land Rover Ltd.

Tata Motors has emerged as the cheapest export-oriented stock based on 12-month forward earnings among the BSE index constituents,mainly due to increasing contribution in revenue and profits from its unit JLR.

FACTORS TO WATCH

* Dollar,euro,Swiss franc hit multi-year highs vs yen

* Oil holds above $108 before Libya ports restart

* Stocks depressed,dollar up on Fed taper talk

* Foreign institutional investor flows

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