India’s financial markets, from stocks, rupee to bonds, on Tuesday came under intense selling pressure as a weakening rupee fuelled concerns over the economy.
The rupee hit a life-time low of 72.69 on Tuesday amid strong dollar demand from foreign banks and importers while the benchmark BSE Sensex crashed 509 points to close at more than one-month low of 37,413.13 amid growing concerns over intensifying global trade war. The index has now crashed by close to 1,000 points in just two days. It had lost 467.65 points in the previous day.
The 50-share NSE Nifty cracked below the 11,300-mark by falling 150.60 points or 1.32 per cent at 11,287.50. Intra-day, it shuttled between 11,479.40 and 11,274.
Investors’ wealth of Rs 4.14 lakh crore was eroded in two days with the market capitalisation plunging more than 1 per cent for the second day in a row to Rs 153 lakh crore after the rupee slid to a new lifetime intra-day low of 72.74/75 in afternoon trade on Tuesday. The Reserve Bank of India sold dollars in the market to stem the fall. The rupee has been the worst performing Asian currency this year. Despite GDP showing strong growth, the currency has weakened about 13 per cent in 2018 amid higher oil prices and a broad sell-off in emerging markets, widening India’s current account deficit and a worsening balance of payments that slipped into the red in April-June for the first time in six quarters.
According to NSDL data, foreign investors have pulled out over $1 billion (Rs 7,429 crore) from debt and equity markets in the month of September. “Capital outflows added to the rupee weakness and the stocks crash,” said a dealer. Even as the markets speculated on a rate hike by the RBI, bond prices fell tracking a weaker rupee, which could stoke inflationary pressures given the rising cost of crude oil and other imported commodities. The 10-year benchmark bond yield rose to 8.18 per cent, its highest level in almost four years.
Analysts said surging crude oil prices, falling rupee and widening trade deficit, besides negative global cues were major factors that dampened the sentiment on the domestic bourses. International benchmark Brent crude again went past the $78 to trade at $78.52 a barrel, rising 1.30 per cent amid looming US sanction against Iran’s petroleum industry. Investors were cautious as trade war concerns between the US and China escalated. “The threat of trade tariffs, outflow of foreign funds and concern on domestic macros will influence investors to stay on a cautious note,” Vinod Nair, head of research, Geojit Financial Services Ltd said.
Of the Sensex constituents, Tata Steel recorded the biggest fall of 3.46 per cent, followed by PowerGrid at 3.21 per cent. FMCG stocks also took a hit owing to weak market sentiment and stretched valuation. ITC dropped 2.92 per cent while Hindustan Unilever fell 1.19 per cent. Auto stocks were also down as domestic passenger vehicle sales declined for the second month in succession with 2.46 per cent drop in August.
Small-cap and mid-cap stocks too fell in sync with the benchmark indices, falling by up to 1.37 per cent. In the sector-wise terms, the BSE consumer durables index was the biggest drag, down 2.47 per cent. FMCG dropped 2.25 per cent, telecom 2.20 per cent, realty 1.78 per cent, infrastructure 1.71 per cent, metal 1.66 per cent, healthcare 1.59 per cent, auto 1.52 per cent, utilities 1.44 per cent, bankex 1.40 per cent, finance 1.40 per cent, power 1.31 per cent, PSU 1.23 per cent, energy 1.18 per cent and oil&gas 1.17 per cent.