Markets, rupee sink in tandem as crude fears rock D-St
DIIs bought shares worth Rs 1,402. per cent crore on Wednesday.
The rupee slid below the psychological mark of 73 per dollar to a record low after crude oil prices firmed up, prompting foreign investors to sell stocks worth Rs 1,550 crore on Wednesday.
Both the Sensex and Nifty ended below psychologically important levels — the Sensex gave up the 36,000 mark while the Nifty closed below 10,900.
The Sensex tumbled 550.51 points, or 1.5 per cent, to close at 35975.63, its biggest single-day decline in percentage terms since March 2018. The Nifty closed 150 points, or 1.4 per cent, lower at 10858.25 — the steepest fall since September 24. The fear gauge, India VIX, spiked 7.6 per cent to end at 18.12.
The rupee hit a record low of 73.42 to a dollar before closing 0.70 per cent lower at 73.34 — the currency’s lifetime low closing. Crude oil prices rose to $85 a barrel, the highest since November 2014.
“Global macros, including oil, have continued to put pressure on the rupee,” said Ashish Vaidya, head of trading at DBS Bank in Mumbai.
Confusion in the market over whether RBI would open a special dollar window for oil marketing firms (OMCs) added to the pressure on the rupee. Market participants felt RBI was comfortable with the rupee’s current levels as it was not seen aggressively intervening to stem the fall.
Bank Stocks Among Worst Hit
“The markets were seen pushing the rupee to the brink today, with major news flows coming from the (finance) ministry and regulatory sources earlier in the day,” said Vaidya. The rupee has fallen 12.9 per cent against the dollar so far in 2018, making it the worst-performing emerging market currency.
Among blue chip stocks, Mahindra & Mahindra, Tata Consultancy Services, Axis Bank, ICICI Bank and Maruti Suzuki were the worst performers, ending down 2.9-6.7 per cent.
The BSE Midcap index also continued to bleed, ending down 1 per cent at 14676.48. The Smallcap index ended up 0.2 per cent at 14424.41.
Banks were among the worst hit as market nervousness inched up ahead of RBI’s monetary policy outcome on Friday. The Bank Nifty ended down 1.2 per cent at 25069.90.
“Financials, being the largest sector in the index, has become a proxy for expressing views on the economy. There is nervousness that the rising rate environment will slow down loan growth,” said Sanjay Mookim, India equity strategist at Bank of America Merrill Lynch.
The events surrounding IL&FS’ default have put pressure on the credit markets in the past couple of weeks, leading to a sharp selloff in shares of banks and financial companies. The government’s decision to take over the functioning of the beleaguered financial institution has alleviated concerns, but the focus has shifted to firming interest rates.
Foreign portfolio investors (FPIs) have sold shares worth .Rs 12,800 crore since September. FPIs have been sellers in 13 out of 20 sessions since September and within those sessions, they have sold more than Rs 1,000 crore worth of stocks in nine sessions.
“Foreign investor sentiment has been weak for a while. Domestic institutional investors (DIIs) were supporting the market, but that has also got impacted by the credit crisis. Getting into election uncertainty, this is unlikely to come back in a hurry,” said Mookim.
DIIs bought shares worth Rs 1,402.5 crore on Wednesday, provisional data showed.
The outcome of RBI’s monetary policy will be crucial for market direction in the near term. The central bank is expected to increase the repo rate by 25 basis points. Investors, however, will keenly watch its comments on inflation, which will determine the direction of the rupee.
“In addition to global macro, the direction of rupee will be a subset of RBI policy action and associated statements,” said Vaidya.