statesman news service
MUMBAI, 24 JUNE: Flight of capital from equity markets coupled with unchecked depreciation of the rupee impacted the stock and foreign exchange markets today.
The S&P Bombay Stock Exchange Sensitive Index resumed lower and remained in the negative terrain throughout to settle 233.35 points or 1.24 per cent lower at 18,540.89. The previous lowest close was at 18,357.80 on 15 April.
At the interbank foreign exchange market, the rupee commenced lower at 59.55 a dollar as against last weekend’s close of 59.27. The downslide continued to a low of 59.83, but some late recovery helped it to settle at 59.68 ~ recording a fall of 41 paise or 0.69 per cent.
Monday saw the 50-stock Nifty of the National Stock Exchange slipping below the 5,600-mark. The S&P Bombay Stock Exchange Sensitive Index also incurred losses to fall to an 11-month low. Analysts describe the situation in the equity market “alarming” pointing out that relentless selling by foreign funds is scaring away investors. The stocks are likely to be volatile this week because of June’s futures and options expiry due on Thursday. The beleaguered rupee haunts the markets as more pessimistic forecasts pour in from investment bankers.
Morgan Stanley in its latest reading of the situation says the American dollar is likely to rise 15 per cent in 2014 posing tougher problems for the currencies in the emerging markets including India. Bank of America-Merrill Lynch in Monday’s report suggested the Reserve Bank of India might sell up to $30 billion if the rupee spilled over 60 a dollar level even as a central bank deputy governor Mr Anand Sinha said at an event here that the RBI and the government were doing their best to “get hold” over the macro-economic conditions.
UK’s Standard and Chartered Bank also cut the rupee forecast for 2014 from 53 a dollar to 60.5 a dollar.
Numbers released by the market regulator Securities and Exchange Board of India suggest foreign institutional investors have been dumping shares for the last nine sessions as their hope of reaping profit in the domestic markets is fading with the decline of the rupee.
The official numbers say they have sold shares worth Rs 7,760 crore over 10 days.
Today’s disastrous performance was also because of the sharp fall in China’s Shanghai Composite by 5.3 per cent after the People’s Bank of China for the first time confirmed depleting liquidity in the country’s “financial system” which now stands at “reasonable” level. It instantly hit share trading. The Shanghai Composite closed 109.86 points down (-5.30 per cent) at 1,963.24. Other Asian markets also felt the cascading effect with Tokyo’s Nikkei ending  1.26 per cent or 167.78 points down at 13,062.78 and Hang Seng of Hong Kong closing at 19,813.98 down 2.22 per cent or 449.33 points.