Equities fell sharply for the second straight session on Friday, as profit-taking coupled with weakness in the global stock markets following Argentina's debt default once again reignited worries that the worst is not over yet and global economic revival will take much longer than anticipated.
The BSE Sensex lost 414.13 points or 1.6% at its close of 25,480.84 while the broader CNX Nifty ended 118.70 points lower or 1.54% from its previous close at 7,602.60.
Including the Friday's fall, the Sensex has lost nearly 600 points in the last two trading sessions.
Market players said debt defaults by Portugal was also on the radar and many players preferred to square off their positions on the weekend rather than carrying forward them.
"All markets in the euro zone are trading below the 200-moving average and we are now expecting a reversal in trend," said Rahul Shah, vice president at Motilal Oswal Securities.
Market participants were of the view that momentum stocks that have rallied too far were the first to fall after weak quarterly earnings. "Only a third of the stocks from the infrastructure, capital goods, engineering and PSU banks showed some positive results while the rest posted de-growth," said G Chokalingam of Equinomics Research and Advisory Services.
Foreign institutional investors sold equities worth about Rs 2,500 crore in the last two days. Market participants said this led to a sharp depreciation of the rupee against the greenback. The rupee hit a four month low on account of a surge in demand for the dollar, dealers said.
From Thursday's close of 60.56, the rupee closed at 61.19 to the dollar on Friday. "It appears that the demand primarily came in from importers and the markets did witness selling at above 61 levels," said a forex dealer.
Market participants were, however, not sure whether there was any intervention by the Reserve Bank of India, but dollar appreciation was capped at around 61.15-61.18 levels.
"It could also be due to exporters selling off their dollar positions," said a dealer at a foreign bank.
Better than expected US growth of 4% in the April-June quarter that could push up US rates, latest development in Argentina and the political turmoil in Ukraine are said to the cause for the dollar strengthening against the rupee, forex dealers said.
Most market participants are of the view, the rupee could slide further and equities would remain under a bearish spell for a while.
"Though Nifty ended above 7,600 levels one could expect at least another 200 points slide," said Shah.
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