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Wednesday, 23 November 2011

Sensex, Nifty crash amid growth, rupee concerns

Indian markets have closed with deep cuts Wednesday as foreign funds liquidated funds on the back of weakening rupee and economy. The Sensex and Nifty closed with over 2 per cent cuts after falling to near two-year lows in intraday trade.


The Sensex ended 365 points lower at 15,699.99 while the broader Nifty index closed at 4,706.45, falling 105.90 points. Earlier, the Sensex had fallen nearly 600 points (intraday low of 15,478.69) while the Nifty had slipped below the 4,700 mark (4,640) for the first time since February, 2010.


Indian markets have now fallen over 20 per cent year to date.


Global cues were not supportive. Economic growth slowed down in the US and Chinese manufacturing data raised further concerns of another recession. Asian markets witnessed sharp decline too. Markets in Taiwan and South Korea fell more than Indian indices. Most European markets were trading with 0.5-1 per cent losses when Indian markets closed.


Analysts said the selloff was driven by foreign institutional investors (FII), who fear a slowdown in the country's economy and a possible downgrade by major rating agencies soon.


"The underlying retail investors in the western world are pulling out money from the risk assets, whether in the emerging markets or developed markets... FII fund managers have to find cash for which they have to sell," Saurav Mukherjea of Ambit Capital said.


Finance Minister Pranab Mukherjee said that withdrawals by foreign institutional investors and weakness in the rupee led to the market crash.


"The currency factor is clearly not helping. It has really hurt investor returns. What is causing the sellout is that they (FIIs) don't see any reason for the rupee to pullback to 45," he added. The rupee has fallen nearly 14 per cent in the last quarter alone. However, the currency was trading higher today, possibly on the back of intervention by the central bank.


Banking, energy, capital goods and IT stocks ended with 2-3 per cent cuts. Consumer durables were the only group of stocks to close with gains. These stocks had fallen sharply yesterday. Most other sectoral indices ended with over 1 per cent cut.


Public sector power major NTPC was the only stock to end with gains on the Sensex. Infrastructure firm Jaiprakash Associates was the top loser on the Sensex, falling over 5 per cent. HDFC Bank, Bharti Airtel, BHEL and Wipro ended 3-4 per cent lower.


On the Nifty, Reliance Communications gained 0.5 per cent after the Supreme Court granted bail to three executives of ADAG group in the 2G case.


DB Realty and Unitech also gained after the court granted bail to their promoters. SKS Microfinance ended with 5 per cent gains ahead of the board meeting. The company's founder Vikram Akula is likely to resign.


The market breadth was extremely weak with an overwhelming 85 per cent stocks declining on the broader BSE 500 index.

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