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