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Rouble turmoil roil global markets

Sensex plummets 538 points, rupee breaches 63 a dollar mark as FIIs sell heavily; experts see the slide continuing in the week ahead

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The market carnage across stock markets in Asia on Tuesday has revived the unpleasant memories of the Asian crisis of the past. Investors in India ran for cover as equity markets fell sharply in sync with Asian markets, shedding nearly 2% at the close of trading.

The BSE Sensex tanked 538.12 points or 1.97% at its close of 26781.44 while the NSE Nifty closed 152 points or 1.85% at 8067.60.

Dealers said the fall in crude oil to below $60 and the surging dollar against most currencies had a spillover effect on Indian markets as foreign institutional investors (FIIs) turned jittery and sold heavily. According to data released by the exchange FIIs were net equity sellers to the tune of Rs 1,247.24 crore while domestic institutional investors were net buyers at Rs 534.60 crore.

On Tuesday, the rupee tumbled to a 13-month low of 63.53 to a dollar. “The world economy has slumped and FIIs are pulling out the market,” said a dealer at a brokerage.

“The rupee has been stable at around 62 levels and it is only now that it has turned weaker,” he said.

China factory survey painted a gory picture of its manufacturing data with fund managers claiming that the country is already in a recession. Russia's rouble too had a free fall despite its central bank having hiked interest rates to 17% from 10.5% in a bid to strengthen the currency. Rouble fell from 58 to the dollar to 77 in intra-day trades trades, said a forex dealer.

The falling crude has hit oil exporting countries like Russia and most dealers said the world economy has come under a dark cloud and India was no exception.

“The outlook is negative. Nifty is now close to the 100-day moving average of 8055. If this is breached tomorrow, there could be more sell-offs and the market could be volatile,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services.

Most market players expect the downward pressure on equities to continue this week. The sharp fall on Tuesday has led to a wide imbalance in margin funding. “Pending positions as of today would be marked to market and would be squared off by the broker or exchange if they are not adequately funded. This could lead to a sell-off at the open on Wednesday,” said Arun Kejriwal of Kejriwal Research.

The week looks uncertain ahead, and the slide could continue this week. All eyes are focused on the outcome of the two-day Federal Open Markets Commission that began late Tuesday.

The domestic equity markets are in an oversold position, dealers said, adding the volatility of the markets would depend upon the outcome of Fed meet.

“Unless there is a dramatic turnaround in the US, we will continue to reel under heavy selling pressure,” he said.

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