Stock Market

Stocks and rupee stumble as central bank refuses to extend helping hand

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MUMBAI: Stocks slumped to a six-month-low and the rupee sank below 74 after the Reserve Bank of India (RBI) kept interest rates unchanged, belying investor expectations that rates would be increased to stem the local currency’s fall. Foreign portfolio investors stepped up the sale of Indian stocks, pulling out ₹3,370 crore amid growing uncertainty about the rupee’s prospects. The Nifty ended down 282.80 points, or 2.7%, at 10316.45 — the biggest single-day fall since November 2016.

The Sensex ended down 792.17 points, or 2.25%, at 34376.99, its biggest one-day drop in percentage terms since February this year.

Friday’s selloff eroded ₹3.86 lakh crore of stock market value.

Since October 1, investor wealth worth ₹8 lakh crore has been wiped out.

The Sensex fell 6.6% during the week, its worst weekly performance since December 2016. The rupee continued its southward journey, falling to a fresh record low of 74.22 to a dollar.

The local unit ended 0.26% down at 73.77. RBI on Friday maintained status quo on interest rates but changed its stance from ‘neutral’ to ‘calibrated tightening’. “RBI has demonstrated its single commitment to inflation management.

Rupee’s weakness is a policy consideration only to the extent it influences inflation,” said Shashank Mendiratta, India economist at ANZ. “The change of stance reflects the uncertainties in the path of inflation later in this fiscal year.” RBI’s decision cheered the bond market.

The benchmark government bond yield dipped 13 basis points to close at 8.03%.

Bond yields and prices move in opposite directions.

Short to medium term rates fell 10-40 basis points in the bond markets. Fund managers do not expect the turbulence to subside if crude oil prices remained elevated, which could continue to weigh down the rupee. “Macro risks arising out of high crude oil prices, US interest rates and potential volatility events continue to remain,” said S Naren, ED at ICICI Prudential AMC. India VIX, or Volatility Index, rose 4.32% to 19.73, indicating traders see near-term risks to the market. Including Friday’s selloff, foreign portfolio outflows so far in October have been almost Rs 8,800 crore.

In September, foreign investors sold shares worth ₹9,600 crore. Purchases worth ₹17,500 crore by domestic institutions since September 1 have not helped matters. The Sensex has fallen 11.8% from its record high of 38989.65 on August 29.

The Nifty has fallen 12.3% from its peak of 11760.20, also hit in August.

On Friday, ONGC, Reliance Industries, State Bank of India, Adani Ports and Bharti Airtel were the worst performers, falling 4.3-15.9%.

Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation extended their freefall from Thursday and ended down 16-25%. Oil prices edged higher on Friday on concern that supply will continue to tighten ahead of imposition of US sanctions against Iran.

Brent crude futures stood at $84.53 a barrel on Friday. “The market could be headed towards more bearishness if crude prices continue to harden.




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Category: Stock Market


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