Sensex slid under the 16,000 mark on Monday on renewed worries over Europe and austerity measures in the United States.
The Sensex slid under the 16,000 mark on Monday on renewed worries over Europe and austerity measures in the United States, even as the rupee hit its lowest against the dollar in almost three years.
The Sensex fell 425.41 points or 2.6% to close at 15946.10, falling below the 16,000 mark for the first time in over a month, after last closing below the level on October 5. The Nifty closed at 4778.35 on Monday. The rupee closed at 52.15 against the dollar, a hair’s breadth away from 52.18 per dollar seen on March 3, 2009.
The decline also throws a spanner in the fight against inflation. “It (rupee fall) will blunt the high base impact. We had expected December inflation at 8.2%, but now it could be 8.5% because of the rupee fall,” Abheek Barua, chief economist at HDFC Bank, told NW18.
To add to global problems, a US government committee appointed to reach an agreement on a $1.2 trillion (over Rs60 lakh crore) cut to the government budget failed. This could affect the credit rating outlook of the world’s largest economy, experts said.
Rating agency Moody’s, which gives opinions on creditworthiness of debt issuers, including governments, issued warnings on France affecting sentiment in Europe.
Currency fluctuations are also a drag on Indian equity markets, said Sandip Sabharwal, chief executive officer of Portfolio Management services at Prabhudas Lilladher, not ruling out further downsides.
“There are concerns mounting on the rupee front and people are waiting for some urgent policy announcements. We are close to forming a panic bottom and there is likelihood of almost 4-5% fall form these levels,” he said.
The rupee became Asia’s worst performing currency, touching Rs52.16 during the day, its weakest since March 2009.
The currency’s decline followed a statement from secretary of economic affairs, R Gopalan, that the Reserve Bank of India’s (RBI) ability to intervene in the foreign exchange market to lift the rupee is limited.
“If the RBI intervenes, it has to get support from other markets also. But after intervening and controlling the rupee’s depreciation a little, just one bad news on the global front will negate the effect of this. We are going to see a correction because the rally in the past week has been too stressed. My expectation is that the rupee will hit 54 in a quarter,” said Abhishek Goenka, chief executive officer, India Forex Advisors.
Foreign institutional investors, whose losses increase with a depreciation in the rupee, were net sellers by Rs743.02 crore on Monday. Domestic institutions were net buyers by Rs595.55 crore.
Realty, metal and banking indices were down over 3%.
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