Markets plunge deeper into red; rupee hits fresh all time low

Indian equity markets extended their fall and traded near low point of the day in the late morning session on Tuesday amid sustained selling across the counters. Market sentiments were dampened after the lower house of Parliament approved a nearly $20 billion plan to provide cheap grains to the poor, which ultimately raised the concerns that country's fiscal deficit will blow out even further. Moreover, global ratings agency Fitch on Monday had said India's fiscal numbers 'look weak' and warned of a downgrade if the country is unable to meet the fiscal deficit target. Investors are likely to remain cautious untill the next Reserve Bank of India (RBI) monetary policy, which is scheduled in September. Benchmarks were also hit on the back of raising prospect of further capital outflows, with BSE Sensex falling 2.54% and the broader Nifty down 2.68%. In currency market, rupee hit fresh all time low of 65.93 a dollar on strong demand for the dollar from banks and importers. On sectoral front, bank, realty and automobile stocks were among the most prominent losers. Several stocks from metal, PSU, capital goods, FMCG and oil sectors too were trading notably lower. Information technology stocks were steady due to a weak rupee.

On the global front, Asian markets were mostly trading lower, following a weak lead from Wall Street where stocks edged lower overnight because of worries about the tension in Syria. Activity is mostly stock specific in the region with earnings reports for the June quarter providing some direction. Back home, the market breadth was favoring the negative trend; there were 537 shares on the gaining side against 1250 shares on the losing side, while 108 shares remained unchanged.

The BSE Sensex is currently trading at 18,085.90 down by 472.23 points or 2.54% after trading in a range of 18,460.72 and 18,034.04. There were only 5 stocks advancing against 25 declines on the index.

The broader indices were trading in green; the BSE Mid cap index was down by 1.46%, while Small cap index also down by 1.00%.

The top gaining sectoral indices on the BSE were, IT up by 0.92% and Teck up by 0.29%. While, Bankex down by 4.15%, FMCG down by 3.75%, Realty down by 3.17% and Metal down by 3.00% were the top losers indices on the BSE.

The top gainers on the Sensex were, Infosys up by 1.20%, TCS up by 0.83%, Wipro up by 0.39%, Tata Power up by 0.26% and Dr Reddys Labs up by 0.18%. On the flip side, HDFC down by 6.20%, ITC down by 5.23%, HDFC Bank down by 4.96%, Coal India down by 4.65% and Maruti Suzuki down by 4.62% were the top losers on the Sensex.

Meanwhile, amid rising doubts over the widening country’s deficits, due to a huge depreciation in the rupee's value, global ratings agency Fitch has warned India of a downgrade if the country is unable to meet its fiscal deficit target. Adding that India's fiscal numbers look weak and the space to contain expenditure is very limited in the second half of the financial year.

The rating agency said that a slowdown in fiscal expenditure in the second half of the year will remain quite challenging for the country. Meanwhile, the government has set target to contain the CAD at 3.7 per cent and fiscal deficit at 4.8 percent of GDP in the current financial year. Referring to the rupee depreciation, Fitch said that falling rupee value may dent the country's foreign exchange reserves, adding that the total reserves could fall to $230 billion from the present level of around $278 billion. Recently, the rupee touched an all-time low of 65.56 against the dollar last week. However, last week, Fitch said that the rupee depreciation would not trigger a change in its ratings and will maintain a 'Stable Outlook' on India's sovereign rating mainly on the back of the country's sizable forex reserves, fiscal deficit management and structural reforms.

In the previous fiscal, the government had massively cut its expenditure to meet its fiscal deficit target owing to a pressure from international rating agencies threatening to cut the country's sovereign rating to junk status if the fiscal deficit worsens, the government was able to contain the fiscal deficit at 4.89 percent in FY13 as against a stated target of 5.2 percent of GDP.

The CNX Nifty is currently trading at 5,329.55 down by 146.95 points or 2.68% after trading in a range of 5,427.40 and 5,312.75. There were 8 stocks advancing against 42 declines on the index.

The top gainers of the Nifty were Ambuja Cement up by 2.38%, Infosys up by 1.22%, Power grid up by 1.07%, HCL Tech up by 0.98% and TCS up by 0.82%. On the flip side, IDFC down by 10.40%, Indusin Bank down by 5.73%, HDFC down by 5.63%, HDFC Bank down by 5.24% and ITC down by 5.09% were the major losers on the index.

The most of the Asian equity indices were trading in red; Straits Times down by 1.67%, KLSE Composite down by 1.01%, Taiwan Weighted down by 0.94%, Seoul Composite down by 0.11%, Hang Seng down by 0.54%, Nikkei 225 was down by 0.69% and Jakarta Composite down by 3.40%. While, Shanghai Composite up by 0.07%.