BSE Sensex spooked after Israel shoots off a missile,an S&P’s analyst his mouth

BSE Sensex,which started above the 19,000 mark,fell to close at 18,234.66,a decline of 3.45 pct.

Written by ENS Economic Bureau | Mumbai | Published: September 3, 2013 10:01:19 pm

It was a terrible Tuesday for the Indian stock and foreign exchange markets with the BSE Sensex and the Indian rupee plunging over escalating tension in Syria and a fresh threat by Standard & Poor’s (S&P’s) on downgrading India.

The sell-off was so massive that the Sensex tanked 651 points and the currency breached the 68 per dollar mark in intra-day movement. However,standard gold shot up by Rs 970 to finish at Rs 32,510 per 10 gm and the benchmark 10-year government bond rose by 12 basis points to 8.58 per cent.

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The sentiment turned more pessimistic after reports said Russia had detected two ballistic objects fired towards the eastern Mediterranean from the central part of the sea. It was later found to be a joint missile test by the US and Israel.

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“If all this drama was not enough,reports said that Standard & Poor’s chances of a credit ratings downgrade had increased for India. This added to the selling pressure,” said Amar

Ambani,Head of Research at IIFL.

Erasing almost three days of gains,the Sensex,which started above the 19,000 mark,fell to close at 18,234.66,a decline of 3.45 per cent. The NSE Nifty closed at 5,341,down 209 points.

The currency started weak and fell back sharply in line with stocks to a low of 68.27,before recovering some ground to settle at 67.63,still down by 163 paise or 2.47 per cent.

“We have a negative outlook on India. We think the chances of a downgrade in the next one to two years is one out of three,” Kim Eng Tan,an analyst at S&P,said in Seoul. S&P is the only one among three major credit agencies to have a “negative” outlook on India’s “BBB-minus” sovereign rating,and any downgrade would send the country to “junk”.

“In the near-term,fears of the Fed (stimulus) tapering and tensions in the Middle East could put the rupee under pressure,with risk emerging for a sell-off beyond 69.00 levels on spot,” said Anindya Banerjee,currency analyst at Kotak Securities.

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