Markets extend losses as rupee hits life time low

Indian equity markets extended losses following the fresh weakness in the Indian rupee, which hit a record low of 61.63 against the U.S. dollar. Reserve Bank has taken various measures to tightened liquidity, but the continued weakness in the currency is likely to force the RBI to hike long term interest rates to attract foreign capital. However, this move is expected to hurt banks because the risk of defaults on current loans will increase. The S&P BSE Sensex plunged 194 points, while the 50-share Nifty index slipped below its key psychological support level of 5650 to hit its lowest level since June 27. On sectoral front, banking stocks witnessed a biggest selloff, with the Bank Nifty falling over 3%. Other rate sensitive such as auto and realty also saw sharp selling pressure.

On the global front, Asian markets were weak as stronger growth in American service industries fueled speculation the US Federal Reserve will soon be able to reduce economic stimulus. Back home, the market breadth was favoring the negative trend; there were 1278 shares on the losing side against 498 shares on the gaining side, while 110 shares remained unchanged. The BSE Sensex is currently trading at 18,987.81 down by 194.45 points or 1.01% after trading in a range of 19,131.92 and 18,956.23. There were 5 stocks advancing against 25 declines on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.75%, while Small cap index lost 1.07%.

All sectoral indices on the BSE were trading in red. Consumer Durables down by 4.03%, Realty down by 3.71%, Bankex down by 2.76%, Metal down by 2.25% and Capital Goods down by 2.11% were the top losing indices.

The top gainers on the Sensex were Hero Moto Corp up by 1.97%, Wipro up by 1.87%, TCS up by 0.41%, Dr. Reddys Lab up by 0.13% and NTPC up by 0.07%. On the flip side, Sterlite Inds down by 4.78%, Tata Steel down by 3.54%, HDFC Bank down by 3.51%, Tata power down by 2.99% and BHEL down by 2.81% were the top losers on the Sensex.

Meanwhile, foreign direct investment (FDI) into India increased by 24.2 per cent to $3.95 billion in April-May period of 2013 from $3.18 billion received in the same period of previous year. The high FDI inflows came from countries including Singapore, Mauritius, the Netherlands and the US.

The FDI inflows for the fiscal 2012-13 recorded a decline of 38% to $22.42 billion compared to the $35.12 billion inflow in the previous year. Country wise, Mauritius remained at the top spot with maximum FDI of $9.49 billion, followed by UK at $7.87 billion, Singapore at $5.25 billion, Japan at $2.97 billion and United States at $1.11 billion. 

Meanwhile, the government has taken several policy decisions to attract foreign investments including allowing FDI in multi-brand retail and civil aviation sectors and seeking legislative approval for increasing FDI cap in insurance and pension sectors. It has approved 100 percent foreign direct investment (FDI) in the telecom sector. Meanwhile, India would require around $1 trillion in the 12th five year plan (2012-2017), to overhaul its infrastructure sector such as ports, airports and highways to boost growth. Further, a rise in FDI will help support the rupee, which depreciated from the record low of over 61 against the US dollar.

The CNX Nifty is currently trading at 5,613.30 down by 72.10 points or 1.27% after trading in a range of 5,664.90 and 5,607.45. There were 7 stocks advancing against 43 declines on the index.

The top gainers of the Nifty were Ambuja Cement up by 4.00%, Hero Moto Corp up by 2.04%, Power Grid up by 1.77%, Cairn up by 0.64% and HCL Tech up by 0.63%. On the flip side, DLF down by 5.11%, JP Associate down by 5.10%, Indusind Bank down by 4.83%, Asian paints down by 4.75% and Sesa Goa down by 4.62% were the major losers on the index.

The Asian equity indices were trading mixed; Shanghai Composite up by 0.36%, Nikkei 225 was up by 1%, Jakarta Composite up by 0.36%. While, Hang Seng down by 1.09%, Taiwan Weighted down by 1.23%, KLSE Composite down by 0.25% and Seoul Composite down by 9.60 points or 0.50% and reached 1906.62.