JOIN USKey benchmark indices, on Tuesday, snapped a three-day winning streak as macroeconomic worries and the rupee’s slide to a record low against the dollar hurt investor sentiment adversely.
Macroeconomic worries weighed on the bourses after media reports suggested that the government will dole out Rs 38,500 crore in additional cash subsidy to public sector oil companies as part of compensation for selling diesel, domestic LPG and kerosene below cost in the last financial year. India is caught in a vicious cycle of rising fuel import costs because of a weak rupee, which swells its fiscal and current account deficits. A weak rupee makes imports costlier.
At the same time, the Organisation for Economic Cooperation and Development (OECD) in a report released on Tuesday suggested that it would be prudent for RBI to wait for clear signs that inflation is falling back to more comfortable levels before reducing interest rates.
The rupee continued to find all-time lows on Tuesday, extending its recent steep slide against the dollar. The rupee has fallen to fresh lows in the past five trading sessions.
The barometer index, BSE Sensex, hit its lowest closing level in more than 19 weeks, while the 50-unit S&P CNX Nifty at NSE hit its lowest closing level in nearly one week.
The market was volatile, though it opened on a firm note on higher Asian equities. Index heavyweight Reliance Industries (RIL) fell in volatile trade, while BHEL gained, with the scrip extending Monday’s gains triggered by new order win. Tata Power tumbled ahead of its FY 2012 results, while pharma major Sun Pharma fell with the stock reversing two-day 2.2 per cent gains. Banking pivotals declined as Finance minister Pranab Mukherjee will move Banking Laws (Amendment) Bill, 2011 in Parliament.
Intraday volatility continued and high volatility was witnessed in late trade as key benchmark indices cut losses after hitting fresh intraday lows.
The BSE Sensex lost 156.85 points or 0.97 per cent to settle at 16,026.41, its lowest closing level since January 9, 2012. The index jumped 183.46 points at the day’s high and declined 182.42 points at the day's low.
The S&P CNX Nifty at NSE shed 45.55 points or 0.93 per cent to settle at 4,860.50, its lowest closing level since 16 May 2012.
From broader markets, the BSE Mid-Cap index declined 0.59 per cent and the BSE Small-Cap index dropped 0.68 per cent. Both these indices outperformed the Sensex.
The market breadth, indicating the overall health of the market, was negative with as many as 1,565 shares on BSE declined and 1,082 shares gained while a total of 128 shares remained static. The total turnover on the BSE amounted to Rs 1,844 crore, higher than Rs 1,579 crore on Monday.
Rupee falls to 55.39 against dollar
New Delhi, dhns: The rupee, backed by a huge dollar demand from oil companies, fell to an all time low of 55.39 against the green back on Tuesday, despite measures announced by the Reserve Bank of India to curb its volatility.
Worried over the rapid fall in the rupee, Finance Minister Pranab Mukherje said that the government is taking a series of steps and the RBI will intervene as and when necessary to check the currency slide below the psychological mark of 55. He, however, said that managing the rupee is market-related, which is too volatile at the moment.
“It depends on the market forces, which are uncertain," Mukherjee told reporters.
Traders, however, expected RBI to take more bold steps to defend the domestic currency.
“This won't affect the market much, it is overall a very poor signal to the overall market that RBI is unable to take bold steps in the current market scenario,” said consultancy firm India Forex Advisors CEO Abhishek Goenka.