Demonetization: Sensex slides to 6-month low over cash crunch worry

Indian stock market recorded its fourth straight weekly loss, with the Sensex sliding 669 points to end at a six-month low of 26,150.24 and the Nifty dropping over 222 points to 8,074 as fears of severe cash crunch gripped sentiment after demonetization of high value currency.

Besides, an uncertainty with regard to US President-elect Donald Trump's likely policies in the coming months also made domestic investors nervous as they believe he might adopt a protectionist approach towards American businesses -- which will lead to outflows of funds from emerging markets.

The government on November 8 announced the withdrawal of old high-value currency notes of Rs 500 and Rs 1,000 from circulation, which severely affected most of the cash-dependent sectors such as real estate, metal, consumer goods among others.

A sharp depreciation in the rupee value against the dollar also dampened the mood in domestic market.

The rupee breached the psychological 68-mark to end near 9-month low of 68.13 against the dollar as sentiment turned bearish on combination of growing US rate hike expectations and stunning dollar run.

Primarily, investors were worried that Trump's policies stance - from protectionism and fiscal expansion - will boost inflation and lead the Federal Reserve to raise interest rates more than expected.

US bond yields surged which triggered concerns that a higher interest rates in the US will spark capital outflows from the emerging equity markets. Besides, a mixed trend on other Asian stock markets also influenced the trading momentum in the domestic equity market.

In the week ended, the Sensex fell by 668.58 points, or 2.49%, to settle at 26,150.24 - its lowest level since May 25, 2016. The 30-share pack has tumbled 1,926.94 points, or 6.86%, in last four weeks.

The Nifty 50 index fell 222.20 points, or 2.68%, to end at 8,074.10. The Nifty has also dropped by 618.95 points, or 7.12%, in four weeks.

Good news on the macro-economic front brought little respite to the domestic market as both indices - Sensex and Nifty - continued their free-fall to log fourth straight weekly loss.

Retail inflation dipped to 4.2% in October compared with 4.39% in September, while wholesale inflation also came down to 3.39% in October as against 3.57% in the previous month.

Both, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) remained closed on Monday, November 14 on account of Guru Nanak Jayanti.

Meanwhile, foreign portfolio investors (FPIs) and foreign institutional investors (FIIs) sold shares worth whopping Rs 6,160.09 crore during the week, as per SEBI's record including the provisional figure of November 18.

In the broader market, the BSE mid-cap index lost 391.59 points or 3.14% to settle at 12,072.43 and the BSE small-cap index dipped 616.13 points or 4.93% to close at 11,868.94.

The fall in both these indices were higher than the Sensex's decline in percentage terms.

Among sectoral and industry indices, metal fell by 6.42%, followed by consumer durables 6.28%, IPO 4.89%, realty 4.50%, FMCG 4.20%, banking 3.88%, auto 3.42%, capital goods 2.17%, healthcare 1.75%.

However, power and IT gained by 0.86% and 0.10%, respectively.

Among the 30-share Sensex pack, 22 stocks declined and remaining 8 stocks rose in the week.

Tata Steel was the biggest loser in the Sensex pack, down 9.78% to Rs 385.10 followed by Tata Motors by 7.17%, ITC 6.21%, Asian Paints 5.85%, Adaniports 5.68%, Coal India 5.31%, HDFC Bank 5.01%, Axis Bank 5.01%, ICICI Bank 4.49%, Maruti 3.43%, Bajaj Auto 2.77%, Lupin 2.75%, GAIL 2.56% and Larsen 1.50%.

However, state-run Power Grid Corp of India was the biggest Sensex gainer, up 4.78% to Rs 191.90 followed by NTPC by 4.31%, SBIN 1.03%, TCS 0.86% and Bharti Airtel 0.50%.

The total turnover during the week on BSE and NSE fell to Rs 15,905.20 crore and Rs 94,503.03 crore, respectively, as against last weekend's level of Rs 19,010.81 crore and Rs 1,28,204.91 crore.

Bullion: Extending its downward spiral for the second week in a row, gold closed below the psychological important Rs 30,000-mark, its lowest level since 5-1/2 month at the domestic bullion market here on heavy unwinding from investors and jewellery traders investors amid weak global cues.

The global turnaround in gold along with government demonetization of higher currency to curb black money amid ensuing cash crunch, IT surveys on big jewellery showrooms cast its shadow in domestic yellow metal business.

Elsewhere, tracking the general trend, silver also plummeted sharply to end below the Rs 42,000 mark - its lowest level in 6 months on frantic selling by stockists and investors coupled with lack of demand from industrial units.

The bullion market was closed on Monday on account of Guru Nanak Jayanti.

On the global front, gold futures slid to their lowest finish since February as strength in the US dollar and growing expectations that the Federal Reserve will announce an interest-rate increase at its meeting in December pulled prices for the metal down for a second consecutive week.

Federal Reserve Chairwoman Janet Yellen said the US interest-rate hike could come relatively soon. Her prepared comments to lawmakers on Thursday came on the heels of strong economic data, which further backs the likelihood of a rate increase.

NY gold futures for December delivery fell $8.20, or 0.7%, to settle at $1,208.70 an ounce, ending about 1.3% lower for the week, while December NY silver fell 14.8 cents, or 0.9%, to $16.624 an ounce, for a weekly loss of about 4.4%.

In the New York Comex trade, gold for December delivery tanked to $1,208.70 an ounce as compared to last Friday's close of $1,224.30 and silver for December contract also fell to $16.624 an ounce from $17.382.

On the domestic front, standard gold (99.5 purity) resumed lower at Rs 29,975 per 10 gram from last Friday's closing level of Rs 30,365 and plunged further to a low of Rs 29,205 before concluding at Rs 29,160, revealing a steep loss of Rs 1,205, or 3.97%.

Pure gold (99.9 purity) also commenced sluggish at Rs 30,125 per 10 gram as compared to preceding weekend's level of Rs 30,515 and drifted further to Rs 29,355 before ending at Rs 29,310, showing a sharp loss of Rs 1,205, or 3.95%.

Silver ready (.999 fineness) opened sharply lower at Rs 42,590 per kilogram from last Friday's closing level of Rs 45,420 and drifted further to Rs 41,725 before closing at Rs 41,765, registering a steep fall of Rs 3,655, or 8.05 pct.

Oils and Oilseeds: Groundnut oil, castorseeds bold and castor oil commercial gained, refined palmolein eased while linseed oil maintained a stable trend at the Vashi oils and oilseeds wholesale market during the truncated trading week.

Groundnut oil ruled stable most of the week, while spurted at fag-end trade on heavy demand from stockists and retailers amid restricted arrivals from producing belts.

Refined palmolein traded lacklustre and eased owing to reduced offtake from retailers.

In the non-edible, castorseeds bold and castoroil commercial firmed up modestly on mild demand from shipper and soap industries.

Linseed oil continued its steady trend due to any worthwhile demand from paint and allied industries.

The oilseeds market remained closed on Monday on account of Guru Nanak Jayanti.

In the edible oil segment, groundnut oil opened steady at Rs 1,000, later climbed to close at Rs 1,040 from its previous weekend's level of Rs 1,000, showing a rise of Rs 40 per 10 kg Refined palmolein resumed down at Rs 573, later recovered to reach Rs 575 before slipping to finish at Rs 572 from its last weekend's level of Rs 575 per 10 kg, showing a loss of Rs 3 per 10 kg.

Among the non-edibles, castorseeds bold opened stable at Rs 3,850, later rose to conclude at Rs 3,875 as against last Saturday's level of Rs 3,850 per 100 kg, showing a rise of Rs 25 per 100 kg.

Castor oil commercial also resumed steady at Rs 800, later gained to end at Rs 805 from last weekend's level of Rs 800, registering a gain of Rs 5 per 10 kg.

Linseed oil opened and closed at previous weekend's level of Rs 1,050 per 10 kg. 

Forex: It was a tough week for the beleaguered rupee amid heightened currency volatility and witnessed a near-term rout- plunging to a near nine-month low against the American dollar on fears of greater capital outflows.

Reeling under immense pressure, the home currency took a hard knock to breach the psychologically significant 68-mark to end with a steep 88 paise loss at 68.13.

This is the weakest closing since February 29 when it had closed at 68.42.

The forex market sentiment turned highly fragile following a combination of growing US rate hike expectations alongwith the stunning dollar run against the backdrop of implications of an on-coming economic policy turn following the US presidential election.

In the rapidly shifting, post-US-election landscape, the US Dollar rallied to the highest level in 14 years against all major counterparts after Fed Chair Janet Yellen reiterated that the US interest rates could rise "relatively soon" due to an improving domestic labour market and stronger growth.

Currency markets across the region were shaken by the shift.

Imminent higher interest rate environment arising out of the US Federal Reserve's hawkish tone along with heavy capital outflows predominantly took a toll on the rupee, a forex dealer commented.

Robust dollar demand from importers and corporates mainly pressurised the home unit, though RBI intervention by selling dollar through state-run banks helped curb sharp swings, the dealer said.

A panic sell-off in domestic equities which tumbled to multi-month lows on the back of roller-coaster global markets and the government's surprise decision to abolish high-value bank notes further added to the woes of local unit.

The outflows were largely on account of unabated selling by foreign portfolio investor (FPI) and hedge fund in equities and debt markets worth over Rs 18,840 crore due to surprising currency depreciation.

At the Interbank Foreign Exchange (Forex) market, the domestic unit opened substantially lower at 67.62 after a long weekend as compared to last Friday's closing value of 67.25 and kept the bearish momentum intact.

It touched a fresh low of 68.19 before concluding at 68.13, showing a hefty fall of 88 paise, or 1.31%.

The losses came on the back of a 55 paise fall last week.

The dollar index ended sharply higher at 101.41 - its best level since April 2003.

Forex market was shut on Monday on account of Guru Nanak Jayanti.

In the meantime, country's foreign exchange reserves declined by $1.190 billion to $367.041 billion in the week to November 11 on account of fall in foreign currency assets.

However, global rating agency Moody's maintained a positive outlook on India's Baa3 rating against the backdrop of series of reforms measures being undertaken by Modi's government.

RBI fixed the reference rate for the USD at Rs 68.0937 and euro at Rs 72.2134 against preceding week's level of Rs 67.0292 and Rs 73.1155, respectively.

In cross-currency trade, rupee recovered against the pound sterling to close at 84.66 from last weekend's level of 84.93 and hardened further against the euro to settle at 72.37 from 73.18 previously.

The domestic unit also rose sharply against the Japanese yen to end at 61.72 from 63.29 per 100 yens earlier.

In the forward market, premium for dollars tumbled due to persistent receiving by exporters.

The benchmark six-month forward dollar premium payable in April dropped to 131-133 paise from 150-152 paise and far-forward contracts maturing in October fell to 289.5-291.5 paise from 318-320 paise last weekend.

On the global front, the greenback remained fairly strong against all major trading counterparts - marking its biggest two-week increase since March 2015 as traders on hardening hopes that President-elect Donald Trump's policies will boost the economy and deliver tighter monetary policy.

The Japanese Yen plummeted for the second-consecutive week as the US Dollar surged to 13-year high even as British Pound continue to give back the recent recovery momentum.

Global crude prices staged a smart rebound to end firmly higher, despite Fed Chair Janet Yellen s hawkish statement that interest rate hikes may occur "fairly soon" and also growing expectations of an OPEC deal to limit production.