Business

Stocks tumble, rupee dips

HYDERABAD:22/06/2012: India's rupee plunged the most in nine months to a all time records low Rs. 57.30 against the dollar on Friday on strong demand for the American currency from oil importers increased capital outflows and concerns over slowdown in global economic growth. \.-.Photo:Mohammed_Yousuf

HYDERABAD:22/06/2012: India's rupee plunged the most in nine months to a all time records low Rs. 57.30 against the dollar on Friday on strong demand for the American currency from oil importers increased capital outflows and concerns over slowdown in global economic growth. \.-.Photo:Mohammed_Yousuf

Outflow of funds from equities on global economic worries, coupled with fear of a deficient monsoon, dragged the benchmark BSE Sensex down by more than two per cent, recording its lowest closing level since July 2014.

The Sensex lost 562.88 points or 2.18 per cent to close at 25201.90. All other broader indices too ended in the red as BSE 100 was down by 2.17 per cent and BSE 200 lost 2.12 per cent. While mid-cap stocks closed with a loss of 1.90 per cent, small-cap dipped by 2.47 per cent.

Meanwhile, the rupee closed low at 66.46 a dollar compared to its previous close of 66.24 on Thursday.

On the NSE 50-share Nifty closed at 7655.05 with a loss of 167.95 or 2.15 per cent.

“Global investors are facing redemption pressure in a risk-off environment,” said Vijay Singhania, founder-Director, Trade Smart Online, a leading discount brokerage firm.

U.S. Federal Reserve’s FOMC holds its two-day meeting on interest rates from September 16. “U.S. Fed rate hike is spooking global markets and the domestic markets no exception. Further downside in Nifty cannot be ruled out in case Fed hikes rates in September,” Mr. Singhania added.

“In the recent weeks, global equities have been impacted by sudden devaluation of its currency by China and signals of an economic slowdown. So far India is concerned, the delay in passing key reforms has also contributed to the disappointment among investors,” said Sanjeev Zarbade, Vice President, Private Client Group Research, Kotak Securities.

Going forward, he said that the U.S. August jobs data, which is slated to be released on Friday in the U.S., would be closely watched as a strong reading would bolster the case for a rate hike. Given the weak investor sentiment that is prevalent currently, “a rate hike may not go down well with most emerging markets.”

However, Mr. Zarbade said that “valuations are coming back to reasonable levels and long term investors should go for buying stocks of quality companies.”

“The global risk is getting highlighted with the focus mounting on the prospects of a U.S. rate hike soon. Continued outflow by FIIs and loss of interest from domestic investors has crashed the Indian market to the new low,” said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services Ltd.

“Global investors are concerned about the Fed rate hike which will impact the flow of funds to equities. This uncertainty is likely to continue till September 17.”

However, Mr. Nair said that this is a good opportunity to invest in quality stocks. “In the medium-term we have room for further 50 bps cut in interest rate by the end of the year, adjusted to the U.S. rate hike expectation and a likely intervention by China other emerging market economies to stimulate the economy. All these factors are likely to provide support to the market.”


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