Triggered by heavy foreign institutional investor (FII) selling, depreciation in rupee and sell off in global stock markets, the benchmark Sensex plummeted over 426.11 points to 20,707.45, to its three- week low. The broader index Nifty also slid sharply by 130.90 points and closed at a one month low of 6,135.85. Rupee continued to depreciate and fell by 44 paise surpassing the Rs 63 per dollar mark for the first time in ten weeks.
As per market experts, Sensex registered its biggest drop in about five months, on fears linked to US monetary stimulus tapering and investors turning cautious ahead of the RBI policy meet. They further added that the depreciation in domestic currency further dampened the overall investor sentiment. While commenting on the reports of Argentina abandoning support of its peso on the open market, analysts said that the event is not big enough to have a global impact. AK Prabhakar, Senior Market Analysts said, “Argentina problem will not have a huge impact on rupee or the Indian markets as it is a very small economy.”
On the other hand, rupee slipped past the Rs 63 per dollar mark for the first time in ten weeks and closed 44 paise lower at Rs 63.10 per dollar amid fears that further stimulus tapering by the US central bank will hit capital inflows. This is its weakest closing level since Rs 63.11 per dollar on November 14, 2013.
In straight three sessions, it has slumped by 129 paise. As per forex experts, FII selling added an extra pressure on the domestic currency. As per the provisional data provided by the stock exchanges, FIIs sold shares worth Rs 1,334.21 crore on Monday.
After opening nearly 235 points lower, the Sensex fell to an intraday low of 20,688.03, before settling at 20,707.45. This was the biggest drop since the 651.47 point plunge on September 3, 2013. Rate sensitive sectors were the worst performers as investors jumped into panic selling after the Reserve Bank of India’s Governor Raghuram Rajan hinted to maintaining status quo in place of the general expectation of rate cuts.
Selling was seen across the board as all 12 BSE sectoral indices ended the sessions with losses. Rate sensitive sectors including real estate, bank and automobile indices were the biggest losers as they fell by 6.82 per cent, 3.97 per cent and 3.33 per cent respectively.
Apart from that, metal, power, capital goods and oil & gas indices as declined by 3.81 per cent, 3.01 per cent, 2.70 per cent and 2.37 per cent respectively. Overall, 1,952 stocks declined while 643 gained on the BSE, meaning seven out of every ten stocks ended lower on Monday. The total turnover fell to Rs 1,867.10 crore today from Rs 2,684.02 crore last session.
With the investors sentiment deeply dented, analysts said that the market correction might be short lived. While talking to The Pioneer, Nitin Murarka from SMC Global said, “We are expecting the markets to fall a little more as the short term view is quite negative. But on the longer terms, things are fine and if after elections we get a stable Government, markets will recover sharply. Investors should wait and avoid buying in the current situations. Best strategy for investors would be to buy for long term after the current correction is completely over and markets starts showing signs reversal.”
RK Global Security’s Rakesh bansal also holds a similar view and said, “As the markets would continue to correct a little more, investors should book profits and then wait for markets to stabalise. I would suggest investors for buying only when there are sign of fresh base building.”
Another Senior Market Analyst, AK Prabhakar is quite optimistic about markets outperforming towards the end of 2014. He said, “Market correction is just on the short term and investors with a longer term view should buy on dips. I expect the markets to outperform in 2014 and advise investors to go for frontline automobile stocks. As far as rupee weakness is concerned, it also will be short lived and soon situation would improve as we approach the general elections.”