Tumbling rupee wreaks havoc in Indian markets; Europe adds to woes

Boisterous bears went on rampage in Wednesday’s trading session, thrashing stock markets in India by close to two percentage points, which led to sixth negative close for the benchmark indices in last seven trading sessions. Tuesday’s relief rally proved as the calm before the cyclone since investors lost more than double the ground they had covered in the previous session.

After the gap down opening, the frontline equity gauges seldom showed signs of recovery as investors resorted to ruthless across the board risk aversion. Though the key gauges eventually found some support around the psychological 4,850 (Nifty) and 16,000 (Sensex) levels, the bulk of the damage was already done amid the somber cues from local money markets along with gloomy Euro-zone tidings.

Sentiments got spooked in the session following the sharp over a percent depreciation in Indian currency, which went on to hit fresh all time lows of 54.46 against the US dollar on sustained dollar demand. Investors grew increasingly worried about the recent sharp fall in Indian currency despite repeated interventions by Reserve Bank of India as relentless risk aversion hit markets and highlighted the vulnerabilities of a country facing challenging fiscal and economic outlooks.

Meanwhile, Finance Minister Pranab Mukherjee’s comments that India will issue some austerity measures to aid the fiscal consolidation process too failed to enthuse market participants. Moreover, cues from the global front too remained discouraging as market participants buckled under the worries that the Greek political leaders failed to reach an agreement to form a government, leading to the possibility of fresh elections in June.

Uncertainty over the outcome of another election in Greece fueled speculation that the country will not be able to access further financial aid and may eventually be forced to exit the euro zone. The European counterparts too got off to a gap down opening and traded with large cuts of around a percent, thereby adding to the pressure on domestic markets.

Back home, across the board profit booking was evident with Metal index getting thrashed by over two and half a percent being the top laggard followed by the rate sensitive Automobile index which too settled with similar amount of losses. Though, no sectoral index managed to keep its head above the water, individual stocks like Sterlite and Bajaj Auto went home with some gains.

On the global front, equity markets across the Asian region got brutally assaulted with benchmarks in Hong Kong and South Korea getting thrashed by around two percentage points on the back of depressing leads from the Euro-zone. Moreover, the European markets too got off to a pessimistic opening as worries over Greece's political instability continue to torment markets in the Euro-zone.

The NSE’s 50-share broadly followed index Nifty got battered by about hundred points to settle just above the psychological 4,850 support level while Bombay Stock Exchange’s Sensitive Index - Sensex suffered a close to three hundred points laceration to finish above the crucial 16,000 mark. Moreover, the broader markets finished on a weak note but managed to perform relatively better than their larger peers, ending with cuts of around a percent.

The markets sank on large volumes of over Rs 1.58 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Tuesday, at over Rs 1.23 lakh crore. The market breadth remained pessimistic as there were 985 shares on the gaining side against 1,733 shares on the losing side while 113 shares remained unchanged.

Finally, the BSE Sensex plunged 298.16 points or 1.83% to settle at 16,030.09, while the S&P CNX Nifty shaved off 84.55 points or 1.71% to close at 4,858.25.

The BSE Sensex touched a high and a low of 16,132.68 and 15,974.60 respectively. The BSE Mid cap and Small cap indices were down by 0.78% and 1.11% respectively.

The only gainers on the Sensex were Sterlite Industries up by 0.87% and Bajaj Auto up by 0.47% while Tata Motors down by 7.34%, Tata Steel down by 3.89%, BHEL down by 3.74%, HDFC down by 3.71% and Hindalco Inds down by 3.28% were the major losers on the index.

There was no gainer on the BSE sectoral space, while Metal down by 2.68%, Auto down by 2.59%, Consumer Durables (CD) down by 1.94%, Capital Goods (CG) down by 1.69% and Bankex down by 1.65% were top losers on the BSE sectoral space.

Meanwhile, in what will come as a minor relief to airline companies, oil firms have slashed jet fuel prices by a marginal 0.4%. This is the third such reduction since April this year and is in sharp contrast to the substantial hikes announced earlier in March and early April.

Jet fuel will now be Rs 272.76 per kl lesser and cost Rs 67,046.95 per kl in Delhi with effect from midnight of May 15, 2012. In Mumbai, the cost will be Rs 68,022.08 per kl as compared to the earlier Rs 68,306.21 per kl.

The earlier cuts by the PSUs were to the tune of Rs 311.74 a kl in May and Rs 169.3 per kl on April 16, 2012. However, these are in sharp contrast to the hikes of 3.2% on March 1, Rs 1,298.88 per kl on March 16 and by another 2.8% on April 1.

The cuts are expected to bring in marginal relief to the cash strapped airlines as jet fuel comprises of 40% of their expenses. IOC, Bharat Petroleum and Hindustan Petroleum revise fuel prices on the 1st and 16th of every month.

The S&P CNX Nifty touched a high and low of 4,882.25 and 4,837.05 respectively.

The top gainers on the Nifty were BPCL up by 2.53%, Powergrid up by 1.65%, Cairn India up by 1.30%, Bajaj Auto up by 1.08% and Kotak Bank up by 1.02%.

On the flip side, Tata Motors down by 7.70%, Tata Steel down by 4.40%, SAIL down by 4.18%, Reliance Infra down by 3.73%, and JP Associates down by 3.59% were the top losers on the index.

The European markets were trading mixed, as France's CAC 40 up by 0.55%, Britain’s FTSE 100 down 0.83%, while Germany's DAX was down by 0.70%.

Downtrend continued in the Asian region and all the Asian equity indices crashed on Wednesday as investors remained concerned that Greece is inching near to an exit from the euro-zone after week-long coalition talks failed to form a government. Meanwhile, the Hang Seng posted its biggest loss in six months, down by over  three percent after mainland media reported flat loan growth for the country’s -- Big Four -- state-owned banks in the first two weeks of May, adding fears about the slowing Chinese economy. However, Chinese shares also slipped over a percentage point, but did comparatively well as investors remained confident that the signs of weakness in the economy may prompt further policy action, after a cut in reserve requirements over the weekend.

Japanese Nikkei share average slid over a percent on Wednesday, as data showing flat bank lending in China eased already lukewarm sentiments for risk assets even though the benchmark managed to end a tad above its crucial 8,800 level. Moreover, broader worries about the euro-zone also weighed in sentiments in Singapore and South Korea. In addition, Taiwan stocks closed down over two percent, tracking regional bourses in falls as the euro-zone’s worries capped risk appetite, with smart-phone maker HTC tumbling on news US sales of some new phones will be delayed.