FIIs sold stocks in a major way, in order to repatriate dollars
Stock indices plunged nearly 2 per cent on Monday and the rupee depreciated to its all-time low to close above the psychological mark of Rs. 63 as foreign institutional investors (FIIs) sold stocks in panic to repatriate dollars. The rupee closed at 63.13 a dollar.
Gold prices, too, rose on Monday as the yellow metal closed with a gain of Rs. 292, up 0.95 per cent for 10 grams as a result of depreciation of the rupee and demand from investors.
Indicating a bearish phase, the Bombay Stock Exchange benchmark index, Sensex, plunged over 450 points from Friday’s close during intra-day trade on Monday to finally close with a loss of 290.66 points at 18307.52 points. On Friday, the Sensex had plunged 769.41 points as panicky FIIs pressed for sell. In two days, the Sensex has lost 1,059 points.
The NSE Nifty, too, came under intense selling pressure and closed with a loss of 93.10 points at 5414.75.
“We are witnessing massive unwinding of portfolio positions by FII funds due to measures initiated by the RBI and the Finance Ministry to support the weakening rupee. The FIIs are selling stocks and taking away dollars as they fear that the government would impose restrictions on dollar outflow from the country. Today also there was withdrawal of money from debt and equity by foreign funds,” said Deven Choksey, Managing Director, KR Choksey Share and Securities. Bluechip stocks lost substantial value and, as per SEBI data, FIIs sold stocks to the tune of Rs. 502 crore and also pulled out Rs. 165 crore from debt instruments. The losers in the Sensex included Bharti Airtel, which was down 5.51 per cent, ICICI Bank by 5.07 per cent, Bajaj Auto 4.55 per cent, Sun Pharma down by 4.05 per cent and Tata Motors down by 3.77 per cent.
“Concerns over mark-to-market losses on banks’ portfolios resulted in the banking index once again being the major loser. Metals stocks were higher whereas IT stocks were also largely in the green,” said Dipen Shah, Head- Private Client Group Research, Kotak Securities
“The increase in borrowing costs is expected to impact the debt-servicing capacity of various debt-heavy companies and will likely lead to an impact on earnings. A depreciating rupee will result in increased costs for various companies, thereby impacting margins. Thus, even at lower stock prices, the valuations have not turned appealing,” Mr. Shah said, on the reason as to why investors are not rushing to pick up stocks at much lower valuation.
Gold prices up
The price of gold on Monday moved up around 1 per cent in the domestic market.
Gold on the Multi-Commodity Exchange was up almost one per cent at Rs. 31,132 per 10 grams while on the international market, it was up 1.3 per cent at $1,373 per ounce. Indian Investors are looking at gold as ‘safe haven’ status in an environment devoid of any investment avenues, feel market watchers.