statesman news service
MUMBAI, 13 JUNE: With Tokyo’s Nikkei leading the crash course, Asian markets tumbled in tandem today under overwhelming bearish sentiment. In Dalal Street benchmark indices suffered losses for the third day in a row completely ignoring the finance minister Mr P Chidambaram’s soothing words that the government was all set to unleash a series reforms over the next two months.
The markets were expecting some firm policy measures to stem the rupee depreciation by the finance minister. In the absence of such an announcement, the domestic currency lost further ground to the American dollar. Against yesterday’s 57.79/80 per dollar, the rupee today closed 0.35 per cent down at 57.9800.
Dismal global clues forced investors to sell riskier assets to minimise their losses since most of the central banks in the region ~ as well as the Federal Reserve of the United States ~ have decided to stop stimulating respective economies. Asian shares today hit the lowest threshold of the current calendar year.
True to the assumption, the domestic equity markets also suffered selling pressure because of the fast depleting rupee. In early morning trade, the S&P Bombay Stock Exchange Sensitive Index slipped below 19,000-mark and the Nifty of the National Stock Exchange crashed below the 5,700-level.
There has been some paring of losses but the benchmarks ended today in the red. The 30-share Sensex was down 213.97 points or 1.12 per cent at 18,827.16. The lowest level was 18,765.53 (down 275.60 points). The 50-stock Nifty closed at 5,699.10 points, down 1.06 per cent or 62.54 points. In Sensex five shares advanced and 25 declined. The ratio in Nifty was 9:41.
Auto, pharma and IT shares were hammered by investors. Sun Pharma which has agreed to pay Rs 3,190 crore to Pfizer Inc for patent infringement is the second company in the segment after Ranbaxy to be penalised by foreign firms. Its share ended at Rs 949.45, down 3.22 per cent on the BSE. Other losers included Tata Motors at Rs 283 (down 3.5 per cent), Tata Steel at Rs 266.15 (down 2.92 per cent) and Infosys at Rs 2,379.10 (down 1.85 per cent).
Analysts say today’s sell-offs on regional bourses were mainly on account of more than six per cent crash in Tokyo’s Nikkei. Two factors contributed to the stock crash. First, Japan’s yen appreciated to a two-month high at 94.7 per American dollar. Second, reacting to unworthy inflation data, China traded at six-month low in a trade resumed after three-day public holiday.
Given today’s uninspiring trading conditions, the finance minister should have kept his reformist announcement on hold, said many market watchers. Apparently, the government’s mood changed following yesterday’s encouraging projections issued by the global rating agency Fitch.
A major declaration that foreign portfolio investors can increase their investments in G-bond by $5 billion to $30 billion went almost unnoticed in today’s sell off.
Earlier in the afternoon, Nikkei closed 843.94 points or 6.35 per cent down at 12,445.38, Hang Seng of Hong Kong 467.62 points or 2.19 per cent down at 20,887.04, and Shanghai 65.54 points or 2.83 per cent down at 2,148.36.
The day on the street started with bad news. Stronger dollar continued to take toll of the rupee which opened at 58.12 against yesterday&’s closing rate of 57.79/80. It plunged further below 58.30 for lack of support from the Reserve Bank of India. The finance minister, advisor Mr Raghuram Rajan and babus in the finance ministry are hoping the rupee to reverse its fall sooner than expected. But money and stock markets hold the opposite opinion.
They see no signs of recovery in the rupee’s equation with the dollar. Markets’ confidence suffered further following CLSA’s (Credit Lyonnaise Securities Asia) projection that under given circumstances, the rupee might plunge to 60 or 61 in near term and this will result in pulling the Sensex and Nifty down.
The markets were expecting some firm policy measures to stem the rupee depreciation. In the absence of such an announcement, the domestic currency lost further ground to the US dollar. The equity markets also suffered selling pressure because of the fast depleting rupee