Economic growth slumping to decade’s low of 5 per cent in 2012-13 and Reserve Bank of India’s poor inflation outlook sent stock markets into a tizzy. Stocks collapsed like a pack of cards with Sensex witnessing the biggest drop in 15 months as it tumbled 455 points and closed at 19,760.30, wiping out Rs 1.1 lakh crore of investors’ wealth on Friday while Nifty plunged by 138.10 points to close at 5,985.95.
Stocks in realty, oil&gas, banks, FMCG and PSUs bore the maximum brunt of selling as 12 out of 13 indices closed down. The 30-share Sensex resumed lower and remained in negative terrain throughout the day to settle at one-week low of 19,760.30, a fall of 455.10 points or 2.25 per cent. This is its worst drop since 478-point fall on February 27, 2012.
Heavyweights like ITC, RIl, HDFC, HDFC Bank, Bharti Airtel, M&M, l&T, SBI, ONGC and Sun Pharma saw marked losses and contributed over 400 points to the Sensex fall. Similarly, the NSE index Nifty plunged by 138.10 points, or 2.26 percent to 5,985.95. MCX-SX flagship index, SX40 today closed 258.98 points lower, or 2.16 per cent, at 11,731.91.
“The sell-off in the market didn’t come in as a surprise as the omens at the start of trade hinted. On Thursday, RBI Governor D Subbarao warned of an upside risk to inflation and high current account deficit, thus denting hopes of a rate cut. The rally from April lows was fuelled by hopes of easing interest rate,” said Amar Ambani, Head of Research, IIFl.
Pulled down by poor performance of farm, manufacturing and mining sectors, economic growth slowed to 4.8 per cent in the January-March quarter and fell to a decade’s low of 5 per cent for the entire 2012-13 fiscal.
“The main fears in the mind of investors are ballooning current account deficit and how soon can the interest rate come down. Market is nervous also because of likely portfolio changes due to changes in the MSCI index,” said Motilal Osswal, CMD, Motilal Oswal Financial Services.
Concerns over a weak rupee also surfaced while subdued trend in overseas markets as investors awaited reports on American consumer Asian markets ended mixed. Key benchmark indices in SouthKorea, Taiwan and Japan rose between 0.15 per cent and 1.37 per cent, while indices in China, Hong Kong and Singapore moved down by 0.41 per cent to 0.74 per cent.
European markets were trading lower in their afternoon trade as key indices in UK, Germany and France declined by 0.95-1.20 per cent. Moving back to the domestic market, 27 scrips out of the 30-share Sensex pack ended lower while just 3 closed higher. Major losers were Bharti Airtel (4.86 pc), Gail India (4.26 pc), Jindal Steel (4.07 pc), ITC (4.06 pc), Hindalco (3.95 pc), M&M (3.91 pc), HDFC (3.82 pc), RIl (3.62 pc), Tata Steel (3.31 pc), Cipla (3.28 pc) and HDFC Bank (3.23 pc).
Wipro (3.14 pc), BHEl (2.63 pc), Sun Pharma (2.54 pc), ICICI Bank (2.41 pc) and ONGC (2.05 pc) also saw sharp losses. “Combined with downside risks to Rupee from the yawning current account deficit and the need to continue to foster greater fiscal discipline, RBI room for manoeuvre to deliver a further string of repo rate reductions remains relatively cramped,” said BNP Paribas Chief Asia Economist Richard Iley.
However, Infosys rose by 2.79 per cent, Sterlite Ind. By 2.58 pct and TCS by 0.07 per cent in the Sensex pack.
Sanjeev Zarbade, Vice President- Private Client Group Research, Kotak Securities, said: “After rallying for much of April and May, global markets took a breather in this week. The Japanese markets continued to remain highly volatile and ended in the negative zone for the week. The Sensex ended flat for the week but came under heavy selling pressure today.”
Market breadth remained negative as 1,591 stocks closed with losses while 791 finished with gains. 117 ruled steady.Meanwhile, Foreign Institutional Investors (FIIs) bought shares worth a net Rs 787.47 crore yesterday, provisional data from the stock exchanges showed.
Rs at 11-mth low
Tracking massive fall in equities, the rupee on Friday declined by 12 paise to end at 11-month lows of 56.50 against the US dollar amid worries over current account deficit and GDP growth.
Rupee commenced lower at 56.50 from previous close of 56.38 at the Interbank Foreign Exchange (Forex) market on Friday. With FII outflows of $90 million in stocks, RBI’s poor inflation outlook and GDP falling to decade’s low pushed the rupee downwards to 56.76 -- its lowest since June 28, 2012.
Rupee concluded at its opening level of 56.50 -- a fall of 12 paise or 0.21 per cent. Dollar demand related to defence payments and month-end imports also hurt rupee, forex dealers said. However, there were no reports of RBI intervention, they added.
During the week, it has plunged by 87 paise or 1.56 per cent. For month of May, it has fallen by over 4.8 per cent -- the worst monthly decline in 12 months.
“Throughout the week we saw the rupee weakening against the US dollar and surpassing the key levels of 56-56.20. Yesterday, RBI’s reality check on inflation and CAD jolted the sentiment. India’s Q4 GDP figure has come in line with market expectations...We expect rupee to move towards 57-58 levels,” said Abhishek Goenka, Founder & CEO, India Forex Advisors.