The benchmark S&P BSE Sensex tanked a whopping 402 points to close at a two-week low of 19,748.19, breaking four weeks of uptrend, following disappointing Q1 results amid steps taken by the central bank to stem the rupee fall.
The Bombay Stock Exchange 30—share barometer, which logged its 30—month closing high of 20,302.13 on Tuesday came off from the highs and dipped to settle at 19,748.19, showing a fall of 401.66 points or 1.99 per cent.
In last four—weeks, it had spurted by 1,375.61 points or 7.33 per cent.
The wide—based CNX Nifty of the NSE also dipped by 143.00 points or 2.37 per cent to end at 2—week low of 5,886.20.
Lower—than—expected first quarter results announced by construction and engineering giant, L&T weighed on the market.
While, it recovered on Tuesday as the markets gave a thumbs—up to the RBI’s fresh curbs on gold imports and a drop in US home sales suggested the Fed would continue its stimulus programme.
The Reserve Bank of India’s move on late Monday to curb gold imports to slash the current account deficit was one of the reasons that helped boost sentiment in the markets, brokers said. A shift in funds to domestic stocks from the bullion and forex markets also supported the market, they added.
However, the RBI took additional steps to tighten liquidity in a bid to curb exchange rate volatility, which dampened the market sentiment and a result banking stocks suffered heavy losses.
The RBI reduced the liquidity adjustment facility for each bank from 1 per cent of net demand and time liabilities to 0.5 per cent, limiting access to borrowed funds from the central bank. It also asked banks to maintain a higher average cash reserve ratio of 99 per cent of the requirement on a daily basis as against 70 per cent earlier.
“Markets sold off sharply after Tuesday on the back of fresh RBI measures,” said Sanjeev Zarbade, Vice President — Private Client Group Research at Kotak Securities. “Due to these measures, banks having higher bulk borrowing would get impacted more as bond yields, CP and CD rates are likely to rise sharply. Even other sector stocks that are sensitive to interest rates witnessed selling pressure.”
Besides cautious trades ahead of monthly expiry of derivatives on Thursday, brokers said a mixed trend in the global markets also affected local stocks.
Q1 results by FMCG giants ITC and HUL also later weighed on the market as sales numbers of ITC missed market estimates while HUL posted a 23 per cent drop in profit.
Brokers said investors refrained from creating major positions before the RBI’s credit policy review scheduled on July 30. They also said the RBI’s liquidity—tightening measures might hurt growth prospects in the short term.
After weak Q1 results from the L&T, other capital goods counters also suffered heavy losses as the S&P BSE—CG index was the top loser from the sectoral indices falling a massive 10.16 per cent.
21 scrips out of the 30—share Sensex pack ended lower while 9 others finished higher.
Major losers from the Sensex pack were Larsen (13.24 per cent), Jindal Steel (9.76 per cent), Tata Steel (9.19 per cent), Hindalco Ind (8.84 per cent), BHEL (8.60 per cent), Sterlite Ind (7.54 per cent), Maruti Suzuki (5.19 per cent), HDFC Bank (5.30 per cent), Gail India (4.10 per cent), ONGC (3.90 per cent), Tata Power (3.73 per cent) and RIL (3.60 per cent).
However, Hero Moto rose by 5.24 followed by Sun Pharma at 3.47 per cent, Bajaj Auto by 3.06 per cent, Infosys at 2.45 per cent, Bharti Airtel at 2.41 per cent, TCS at 1.75 per cent and M&M 1.72 at per cent.
The total turnover at BSE and NSE fell to Rs 9,390.41 crore and Rs 55,989.13 crore, respectively from the last weekend’s level of Rs 9,411.92 crore and Rs 57,586.28 crore.
Among the other sectoral indices S&P BSE—Bankex dropped by 4.73 per cent followed by S&P BSE—PSU at 4.15 per cent, S&P BSE—Power at 3.58 per cent, S&P BSE—Metal at 3.28 per cent, S&P BSE—Oil&Gas 3.24 at per cent, S&P BSE—Realty 2.38 per cent and S&P BSE—HC 1.72 per cent.
However, S&P BSE—IT rose by 2.03 per cent and S&P BSE—Teck at 1.76 per cent.
Meanwhile, foreign institutional investors (FIIs) were the net sellers.
Forex: The rupee continued its upward march for the third straight week, rising by 31 paise to close at one—month high of 59.04 against the Greenback during the week under review on measures taken by the central bank to stem the rupee fall amid sustained dollar selling by exporters and some banks.
However, negative factors like weakness in local stocks and capital outflows restricted the rupee rise.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed better at 59.30 a dollar from last weekend’s close of 59.35, but dropped to a low of 59.87.
Later, it bounced back on steps taken by the apex bank to a high of 58.69 before settling the week at 59.04, showing a rise of 31 paise or 0.52 per cent. In three—week of gaining string, it has flared up by 118 paise or 1.96 per cent.
Seeking to tighten gold imports in the face of a widening CAD, the Reserve Bank on Monday evening set stringent conditions for importers, linking inward shipments to future exports. The restriction came when gold imports, in addition to oil, are putting pressure on the current account deficit, which soared to record high of 4.8 per cent in 2012—13.
To contain the exchange rate volatility, the RBI on Tuesday announced more measures to squeeze liquidity from the banking system. It limited access to borrowed funds by reducing the liquidity adjustment facility for each bank from to 0.5 per cent of net demand and time liabilities from 1 per cent.
The RBI also asked banks to maintain a higher average cash reserve ratio of 99 per cent of the requirement daily as against 70 per cent earlier.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) Pvt Ltd said, “Rupee continued to trade strong this week also as RBI again took some steps to make currency scarce and squeeze the liquidity to support the Rupee.
“This week on Wednesday Indian Rupee posted its biggest single—day gain in nearly a month. On the weekly basis it closed strong for the third consecutive week. During this month till now Rupee has already appreciated by more than 2.50 per cent.”
“Local equity markets reacted negatively on the actions taken by the RBI and lost more than 2 per cent this week which capped the Rupee gain. The trading range for the Spot USD/INR pair is expected to be within 58.70 to 59.40. The dollar index which measures the greenback against a basket of six other currencies continued to trade weak for the third consecutive week. This month Dollar Index has weakened by almost 3.50 per cent till now,” he added.
The premium for the forward dollar firmed up further on sustained paying pressure from banks and corporates.
The benchmark six—month forward dollar premium payable in December rose further to end at 224—229 paise from last weekend’s level of 203—206 paise and far—forward contracts maturing in June also finished sharply higher at 440—445 paise from 408—411 paise.
The RBI fixed the reference rate for the US dollar at 58.9133 and for the euro at 78.2180 from previous weekend’s level of 59.7950 and 78.5222, respectively.
The Rupee remained weak against the pound sterling to 90.98 from preceding weekend’s close of 90.62 and also dropped further against the euro to end at 78.36 from last weekend’s close of 77.93.
However, it fell back against the Japanese yen to 59.88 per 100 yen from previous close of 59.20.
Dry Fruits: Almond and cashew prices declined in the wholesale dry fruits market in the national capital during the week under review owing to reduced offtake by stockist following fall in local demand at existing higher prices.
Increased arrivals from overseas markets and recovery in the rupee also put pressure on the prices.
Sentiment turned weak owing to reduced offtake by stockists following fall in demand from local parties at prevailing higher prices.
Almond California prices fell by Rs 300 to close at Rs 15,700 per 40 kg, while its kernel was also traded Rs 15 lower at Rs 550—570 from previous week’s mark of Rs 560—585 per kg as recovery in the rupee made imports somewhat cheaper.
Almond (girdhi and gurbandi) fell by Rs 100 each to settle at Rs 4,500—5,000 and Rs 7,800—8,200 per 40 kg bag, respectively.
Cashew kernel (No 180, 210, 240 and 230) prices fell by Rs 20 each to conclude at Rs 800—900, Rs 750—800, Rs 600—650 and Rs 550—600 per kg, and its broken 2,4 and 8 pieces also traded lower at Rs 350—400, Rs 300—355 and Rs 250—315 per kg, respectively.
Copra prices declined by Rs 100 to finish at Rs 6,100—6,400 per quintal.
Kishmish Indian yellow and green prices declined by Rs 200 each to ended at Rs 3,800—4,500 and Rs 4,700—7,300 per 40 kg, respectively.
Pistachio Irani, hairati and peshwari prices also fell up to Rs 10 to settle at Rs 910—950, Rs 1,070—1,140 and Rs 670—720 per kg, respectively.
Kirana: Select spices declined in the national capital during the week under review on stockists selling against slow down in buying activity at prevailing levels and closed with widespread losses.
Sentiments also turned weak due to lack of demand from overseas buyers, higher carry—forward stocks and prospects of a good monsoon.
Black pepper prices fell by Rs 20 to settle at Rs 430—550 per kg on lack of demand from overseas buyers.
Cardamom brown jhundiwali and kanchicut prices fell up to Rs 20 to finish at Rs 1,000—1,040 and Rs 1,040—1,180 per kg and cardamom small varieties such as chitridar, colour robin, bold and extra bold prices declined by Rs 10 each to close at Rs 640—740, Rs 590—690, Rs 640—690 and Rs 790—890 per kg, respectively.
Cloves prices traded lower at Rs 825—925 against previous closing of Rs 850—950 per kg.
Coriander prices fell by Rs 200 to Rs 7,800—11,800 per quintal.
Mace—red and yellow fell by Rs 10 each to ended at Rs 750—800 and Rs 1,150—1,250 per kg, respectively.
Nutmeg traded lower at Rs 550—650 against previous mark of Rs 560—680 per kg.
Poppyseed (Turkey, MP—RAJ, Kashmiri) declined by Rs 10 each to conclude at Rs 330—355, Rs 350—400 and Rs 350 per kg, respectively.
Red chilli prices quoted lower at Rs 6,400—11,900 instead of Rs 6,500—12,000 per quintal on expectation of strong crop in the coming year on good rainfall.
Turmeric prices drifted Rs 100 to Rs 6,400—11,400 per quintal, as a timely progress of the monsoon rains raised hopes of better sowing, while higher carry forward stocks.
Jeera common and jeera best quality also fell up to Rs 400 to Rs 13,100—13,500 and Rs 17,100—17,400 per quintal on weak local demand and good progress of the monsoon.
In the non—edible section, castorseeds bold opened stable at Rs 3,500, later declined to end at Rs 3,425 from the last weekend’s level of Rs 3,500 per 100 kg, showing a fall of Rs 75.
Castor oil commercial also resumed steady at Rs 730, but later eased to close at Rs 715 from its last weekend’s level of Rs 730 showing a loss of Rs 15 per 10 kg.
Linseed oil also opened stable at Rs 730, later moved down to end at Rs 725 from its previous weekend’s level of Rs 730 showing a modest loss of Rs 5 per 10 kg.
Moving to the futures section, Castor seeds for September delivery resumed lower at Rs 3,652 and tanked further to Rs 3,420 before concluding at Rs 3,426 from last Saturday’s closing level of Rs 3,712, showing a sharp fall of Rs 286 per tonne.