Mumbai : The battered Indian currency hit a new low on Tuesday, touching 66.30 against the dollar and stocks nosedived on worries the food security programme will widen the fiscal deficit and raise the risk of a rating downgrade.
The market opened down in the backdrop of sliding rupee and remained under selling pressure ahead of F&O contract expiry later this week.
Markets are likely to see further downside as GDP data for the April-June quarter is expected on Friday and investors are cautious in the midst of deepening slowdown, experts said.
The 30-share Sensex remained in negative terrain since the opening and touched a low of 17,921.82 before ending at 17,968.08, a fall of 590.05 points or 3.18 %. The broader Nifty slumped by 189.05 points or 3.45 % to 5,287.45. Investor wealth worth Rs 1.7 lakh crore was eroded as participants resorted to panic-selling across the spectrum. Financial stocks bore the brunt of the sell-off followed by FMCG, energy, healthcare, auto, metal and infra counters.
Tuesday’s sell-off was not India-specific as currencies and equities in emerging markets too came under selling on heightened fears over a possible US intervention in Syria amid uncertainty over Fed tapering its stimulus measures.
Brent North Sea crude oil at one stage reached USD 111.92 the highest point since early March. New York’s main contract, West Texas Intermediate for delivery in October, was up 95 cents to 106.87 USD a barrel.
“The Food Security Bill was passed yesterday, which is expected to add to the fiscal burden,” said Sanjeev Zarbade, VP at Kotak Securities. “We believe crude oil has emerged as a key risk in the near term, which is not a good sign for the rupee. Thus, on an overall basis, the macroeconomic outlook has weakened and risks have clearly strengthened.”
Twelve of the 13 sectoral indices closed lower, led by banking, capital goods and power shares. Following the weak sentiment across the stock market, blue-chips, including HDFC Bank, HDFC, Ultratech Cement, NTPC and ACC touched their respective 52-week low.
Shares of HDFC Bank tanked 8.04 % to close at Rs 560.9, while mortgage lender HDFC plunged 7.70 % to Rs 686.85 and NTPC lost 5.86 % to close at Rs 124.50.
In contrast, 47 scrips scaled their 52-week high at the BSE. The rupee has lost over 20% in 2013 and is among the worst performers globally.
PM seeks $ 25 bn cut in oil import bill
Prime Minister Manmohan Singh has sought $ 25 billion cut in oil import bill to narrow current account deficit, Oil Minister M Veerappa Moily said.
India, which paid about $ 170 billion last fiscal for importing oil, is renewing imports of the fuel from Iran as unlike imports from other countries, it pays the Persian Gulf nation in rupees.
“Oil (imports) is one of the components responsible for CAD. Prime Minister has told us to save $ 25 billion in import bill. As of today, we have pieced together a plan to save $ 22 billion in import bill,” Moily said. A large part of the plan includes restarting import of oil from Iran.
Officials said if India was to import 10 or 11 million tonnes oil from Iran this fiscal, it could save a minimum of USD 10 billion in foreign exchange outflow. India had last fiscal imported 13.1 million tonnes of oil from Iran.
“The rising USD-INR rate is expected to push up import cost of gold and crude oil. Further, concerns of rating downgrade are increasing. This is making investors and traders nervous and we are seeing the result of it on the market. Any further rise in USD/INR rates will trigger further fall,” said Nagji K Rita, Chairman & MD, Inventure Growth and Securities.
Continuing the down-slide for the second day, shares of IDFC fell sharply by nearly 17% to Rs 78.65 as the company’s ceiling limit of overall foreign shareholding has been reduced to 54%.