Shrugging global rally Indian markets plunge as rupee enters unchartered territory

Indian stock markets seem to have taken a turn for the worse this Tuesday with the benchmark equity indices being in the league of their own, plunging about a percentage points and significantly underperforming their global counterparts.

The frontline gauges not only surrendered their early gains in the session but halted their three session gaining streak. It was turning out to be a choppy session of trade with the frontline indices trading in an extremely tight range in the first half with gains of around half a percent. However, the psychological 16,300 (Sensex) and 4,950 (Nifty) levels proved as tough nuts to crack for the key indices which failed to sail beyond those levels despite repeated attempts.

A sudden wave of selling pressure emerged in early afternoon trades and the frontline indices showed a freefall of sorts in mid noon trades tracking the downslide in rupee which grinded lower to the lowest levels seen in Indian history against the dollar for the fifth successive day amid concern about slowing domestic growth and continuing global uncertainty.

The anemic rupee’s ruthless fall continued despite RBI’s repeated attempts to rein its depreciating run. Investors are growing increasingly nervous over the beleaguered currency’s slide as they fear that Indian Reserve Bank is expending the already scanty forex reserves for a losing cause. Domestic markets failed to soar in tandem with the rally in global markets as the depreciating rupee concerns marred investors’ appetite for riskier asset classes like equities.

The local markets collapsed around two percentage points from the high point of the day in sharp contrast with the Asian markets where most equity indices surged over a percent, while the benchmarks in Europe too traded with significant gains in the session.

Market participants were seen squaring off hefty positions from the Metal counter, which got pounded by close to two percent and remained the top laggard in the space. Also, the rate sensitive Banking and Realty pockets bore the brunt of hefty selling pressure and sank by over a percent each. On the other hand, buying was evident in the IT and TECk counters following the rupee’s sharp depreciation as the software and technology exporters stand to gain from stronger dollar.

On the global front, sentiments in Asian markets remained sanguine since the start of trade tracking overnight rally in US markets as investors resorted to bargain hunting amid some supportive developments from the meeting of group of eight (G8) nations and hopes that world’s second largest economy China would employ further stimulus measures to spur growth of the global growth machine.

Moreover, the European markets too got off to an encouraging start and are trading on a positive note as investors await the outcome of an informal meeting of leaders from Euro-zone on Wednesday in which some decisions on further measures to tackle the region’s onerous debt crisis are expected.

The NSE’s 50-share broadly followed index - Nifty plunged by about a percent to settle above the psychological 4,850 support level while Bombay Stock Exchange’s Sensitive Index - Sensex sank over hundred and fifty points to finish above the crucial 16,100 mark. Moreover, the broader markets performed relatively better than their larger peers as they finished with cuts of over half a percent.

The markets slumped on good volumes of over Rs 1.61 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Monday, at over Rs 1.23 lakh crore. The market breadth remained pessimistic as there were 1,082 shares on the gaining side against 1,565 shares on the losing side while 128 shares remained unchanged.

Finally, the BSE Sensex lost 156.85 points or 0.97% to settle at 16,026.41, while the S&P CNX Nifty declined by 45.55 points or 0.93% to close at 4,860.50.

The BSE Sensex touched a high and a low of 16,366.72 and 16,000.84 respectively. The BSE Mid cap and Small cap indices were down by 0.59% and 0.68% respectively.

The major gainers on the Sensex were Tata Motors up by 1.17%, TCS up by 1.17%, BHEL up by 1.04% and HDFC up by 0.24%, while Tata Power down by 5.29%, Maruti Suzuki down by 4.50%, Sterlite Industries down by 3.96%, SBI down by 3.43% and Hindalco Industries down by 2.99% were the major losers on the index.

The top gainers on the BSE sectoral space were IT up by 0.46%, TECk up by 0.15% and Consumer Durables (CD) up by 0.11%, while Metal down by 1.83%, Bankex down by 1.51%, Power down by 1.45%, Realty down 1.23% and Capital Goods (CG) down by 1.21% were top losers on the BSE sectoral space.

Meanwhile, the white paper on black money in India has refrained from providing any government estimates on black money but has quoted figures put forth by other organizations.  As per the agency named Global Financial Integrity (GFI) the amount as on December 2011 was to the tune of $104 billion whereas the Swiss national banks have pegged it at Rs 9,295 crore by the end of 2010. The paper has also spoken about the amount of FDIs routed through countries like Singapore and Mauritius to avoid taxes.

GFI is an international agency that promotes national and multi-lateral policies, safeguards and agreements aimed at curtailing the cross-border flow of illegal money. As per the agency, in the year 1984, black money in India amounted to Rs 37 crore as per estimates provided by the National Institute of Public Finance and Policy. The agency has also given the estimates on the illegitimate flow of money from China which stood at a substantial $2,467 billion as on December 2011.

The figures provided by the Swiss banks have been confirmed from the Swiss Ministry of External Affairs. It has also been quoted that deposits of Indians in Swiss banks have decreased from Rs 23,373 crore in 2006 to Rs 9,295 crore in 2010.

While mentioning the flow of foreign direct investment (FDI) into the country the paper has observed that Mauritius and Singapore were the two topmost FDI sources in India during April-March 2000-11. Mauritius accounted for 41.80% of entire FDI of $54,227 million from April-March 2000-11 and Singapore accounted for 9.17% of the total. The paper has noted that such big amounts could not have been sourced from small economies like those of Mauritius and Singapore and is indicative of the fact that these transactions had been routed through these countries to avoid taxes.

The S&P CNX Nifty touched a high and low 4,956.35 and 4,849.90 respectively.

The top gainers on the Nifty were TCS up by 2.46%, HCL Tech up by 2.20%, Tata Motors up by 1.55%, Cairn up by 1.33% and SAIL up by 1.21%.

On the flipside, Sesa Goa down by 5.38%, Tata Power down by 5.33%, Maruti Suzuki down by 5.04%, Sterlite Industries down by 4.01% and Sun Pharma down by 3.65% were the top losers on the index.

The European markets were trading in green, as France's CAC 40 up by 0.57%, Britain’s FTSE 100 was up by 0.61%, while Germany's DAX up by 0.42%.

Sentiments remained bullish in the Asian region and all the Asian equity indices rallied on Tuesday ahead of European Union summit to be held on May 23, 2012. The market-men are hoping that leaders, at an upcoming summit, will take some important measures to promote growth and find ways to keep Greece in the euro zone. While, strong performance on Wall Street too aided the sentiments in the region. Meanwhile, Hong Kong and China shares rose 0.62% and 1.06% respectively, supported by Chinese growth proxies on report that Beijing will fast-track investment approvals in infrastructure space to battle lethargic conditions in the world’s second-largest economy. Moreover, Japanese Nikkei and South Korean KOSPI Composite surged 1.10% and 1.64% respectively to extend Monday's rebound, as investors kept themselves busy in picking up blue-chip stocks after last week's flurry of aggressive selling, triggered by concern over a deepening euro crisis.