Mumbai: Markets fell 1.8% on Wednesday to their lowest levels in over 4 months as the rupee dropped to a record low reinforcing uncertainty about the country’s fiscal and economic fundamentals at a time of steep global risk aversion.
The rupee fell to a record low 54.52 against the dollar surpassing the previous record low of 54.30 hit in mid-December, as worries about the euro zone intensified as Greece gears up for new elections.
India is seen particularly vulnerable at a time of global risk aversion given the concerns about its fiscal and current account deficits, and slowing growth at a time of persistently high inflation.
Domestic stocks have tumbled 13% since hitting a 2012 peak in mid-February, compared to a 10.7% fall in the MSCI Asia-Pacific ex-Japan index during the same period.
Markets plummeted on Wednesday with concerns mounting about the battered rupee. Mint’s Krishna Merchant looks at how Indian stocks fared during the day and which ones managed to make gains.
“This is a big negative,” said Jagannadham Thunuguntla, a strategist at SMC Global Securities in New Delhi, referring the rupee and adding it would raise concerns among foreign investors.
“The outlook is appearing to be quite bleak. I think the stock market is open to a 5-10% downside in the next month or two.”
The country’s main 30-share BSE index fell 1.83% to 16,030.09 while the broader 50-share NSE index lost 1.71% to 4,858.25 points.
Bank of America-Merrill Lynch said it expects the BSE index to drift to 15,000, given economic growth and current account concerns and noting business confidence was below the Lehman crisis levels.
Although a weaker rupee should help exporters, analysts said overall sentiment was being trumped by concerns foreign investors would exit India in light of the global risk aversion and the domestic challenges.
Capital inflows shrivelled from a peak of $7.2 billion in February to $387 million in March and eventually turned negative in April at $926.8 million.
Blue chips extended recent losses, with ICICI Bank , the country’s biggest private lender, ending down 2.75%, and software services exporter Infosys losing 1.9%.
Among other decliners, Tata Motors dropped 7.4% after the company said global vehicle sales growth in April was flat from a year earlier, missing expectations.
Maruti Suzuki closed 2.1% lower.
Reliance Industries ended 0.8% down, extending its drop for the month to 9.3% as investors remain concerned about its earnings outlook on the back of lower estimates for gas reserves.
However, among the gainer were Cairn India, Bank of Baroda and Godrej Consumer Products after MSCI added the stocks to its global indices.
Cairn India shares ended 1.2% up while Godrej Consumer added 2.7%