Domestic currency plunging to a new low at Rs 64.54 in intra-day trade and finally closing at Rs 64.11 per dollar, down 86 paise wreaked havoc in the stock markets as Sensex crashed another 340 points today to the lowest closing level in more than 11 months.
The 30-share Sensex opened at 18,545.44 and rallied more than 300 points from Tuesday’s close to a high of 18,567.70 before declining to a low of 17,807.19. It closed at 17,905.91, a loss of 340.13 points, or 1.86 per cent, the lowest level since Sept. 11, 2012. In four days, the Sensex has plunged by 1,461.68 points or 7.55 per cent. The Nifty index dropped 98.90 points, or 1.83 per cent, to 5,302.55. Investor wealth worth a whopping $100 billion has been lost in four straight days.
Market experts said market sentiment was hurt by sustained weakness in the rupee and expectations the US Federal Reserve would start withdrawing its bond-buying programme next month.
Bharti Airtel, Sun Pharma, Sterlite Industries, ITC and Reliance Industries led the losers on the Sensex, while BHEl, HDFC and HDFC Bank gained. ITC and Reliance Industries together contributed 176 points to the index decline.
Metals, oil and gas, realty and FMCG were among the sectoral indices that fell. The bank and consumer durables sectors were the only two that gained. Bank stocks rallied after the RBI relaxed some rules to will help them deal with the notional or mark-to-market (MTM) loss in their government bond portfolios due to the recent sharp fall in bond prices. Investors are worried that the Government steps to lift the depreciating rupee may not be adequate to narrow the current account deficit.
A weak rupee raises cost of imports like oil and adds to the risk of inflation as India prepares for the next general election by May. The day began on a positive note for the rupee and stocks as measures by the Reserve Bank, including an Rs 8,000 crore bond buyback, lifted investor sentiment. The rupee rose to 63.10 against yesterday’s close of 63.25. The BSE benchmark Sensex also gained over 321 points, led by bank stocks.
However, dollar strenghtening ahead of the much-awaited release of the minutes of the US Fed’s July meeting weighed upon most currencies, including the battered rupee.
The Indian currency crashed to a yet another new low of 64.54 to the dollar and finally settled at 64.11, down 86 paise, on heavy dollar demand and capital outflows. In the past 5 days, it has lost 292 paise. The rupee also closed below 100-level for the first time in history against the British pound.
“Despite a slew of measures by RBI, rupee is seen giving a muted reaction to the same and going on with weak trend,” said Abhishek Goenka, Founder & CEO, India Forex Advisors. “...Bears smelt blood with the spot rupee touching a new all-time low to dollar. This triggered a massive sell-off on Indian bourses,” said Amar Ambani, Head of Research at IIFl.
There was some respite for investors in gold as the yellow metal in Mumbai rose by Rs 75 to Rs 31,440 per 10 gms. In the bond market, the yield on 10-year Government securities maturing in 2023 dipped to 8.41 per cent from 8.90 per cent. Asian stocks ended mixed before the release of the minutes of the Federal Reserve’s July meeting. Key indices in Hong Kong, Singapore and South Korea finished lower, while indices in China and Japan inched up.
In Europe, benchmark indices in France, Germany and UK were lower.