Mumbai: Rupee depreciation, foreign fund outflows and an anxiety over the impact of the demonetisation move plunged the Indian equity markets on Tuesday.
The two key indices of the Indian equities markets closed the day’s trade with losses of around two per cent each, as heavy selling pressure was witnessed in automobile, banking and metal stocks.
The wider 51-scrip Nifty of the National Stock Exchange (NSE) receded by 187.85 points or 2.26 per cent to 8,108.45 points. The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 26,809.61 points, closed at 26,304.63 points — down a 514.19 points or 1.92 per cent from the previous close at 26,818.82 points.
The Sensex touched a high of 27,809.61 points and a low of 26,253.63 points during the intra-day trade. The BSE market breadth was skewed in favour of the bears with 2,354 declines and 346 advances. The broader markets underperformed the headline indices the midcap index fell by 3.71 per cent and the smallcap index ended lower by 4.45 per cent.
On November 11, the Indian equity markets had plunged to their lowest levels in around four months, as heavy selling pressure forced the key indices lower by 2.5 per cent each. The barometer index had declined by 698.86 points or 2.54 per cent, while the NSE Nifty receded by 229.45 points or 2.69 per cent.
Initially on Tuesday, the benchmark indices opened in the red in sync with broadly negative Asian markets. The equity markets were not able to recover from the last week’s huge falls after investors’ sentiments were eroded by the surprise victory of Republican Donald Trump in the November 8 US Presidential election. Moreover, the sudden move by the government to demonetise Rs 500 and Rs 1,000 currency notes hampered investors’ risk-taking appetite. The move is expected to impact cash-dependent sectors like transport, real estate, construction, gems and jewellery, and consumer durables. It might also delay in the recovery of earnings growth.
Besides, the weakening of the rupee on the back of strong dollar, and lower crude oil prices also added to the downward trajectory. The Indian rupee weakened by 48 paise to 67.74 against a US dollar from its previous close of 67.26 to a greenback.
Furthermore, investors remained cautious ahead of the release of Consumer Price Index (CPI) figures, which could influence the Reserve Bank of India’s (RBI) rate decision during its early December meet. However, lower-than-expected wholesale price index (WPI) data released by the Commerce and Industry Ministry gave little or no respite from heavy selling pressure.
The WPI data showed that India’s annual rate of inflation based on wholesale prices fell marginally to 3.39 per cent for October from 3.57 per cent for the month before. “There is a downward pressure on liquidity following the demonetisation drive in the economy. The Indian equity markets have witnessed an outflow of over Rs 7,000 crore in the last few day,” Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services, said. “The CPI figures to be announced later in the day will influence the easing of interest rates in the next RBI monetary policy meet in December.”
In terms of investments, provisional data with exchanges showed that the foreign institutional investors (FIIs) sold stocks worth Rs 2,353.82 crore, and the domestic institutional investors (DIIs) divested scrip worth Rs 104.83 crore. According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, the CNX Nifty traded with bearish sentiments inline with rupee depreciation. “Banking, pharma, auto, oil-gas and aviation stocks traded lower due to selling pressure,” Desai said. Sector-wise, all the sub-indices of the BSE closed in the red, except for the IT index, which rose by 27.42 points.
The S&P BSE automobile index plummeted by 1,042.41 points, the banking index plunged by 550.98 points, and the metal index declined by 511.17 points. Major Sensex gainers on Monday were: State Bank of India (SBI), up 1.91 per cent at Rs 278.10; Wipro, up 1.51 per cent at Rs 448.05; Dr.Reddy’s Lab, up 1.47 per cent at Rs 3,308.70; ONGC, up 0.90 per cent at Rs 275.80; and Tata Consultancy Services (TCS), up 0.81 at Rs 2,122.10.
Major Sensex losers were: Tata Motors, down 9.88 per cent at Rs 457.25; Tata Steel, down 7.80 per cent at Rs 393.55; Asian Paints, down 7.41 per cent at Rs 892.20; Maruti Suzuki, down 5.71 per cent at Rs 4,842.70; and Axis Bank, down 3.86 per cent at Rs 479.15.