Persistent depreciation in rupee annihilates Dalal Street; Sensex plunges 2%

Indian stock markets got obliterated on the week’s last trading session with the frontline equity indices tumbling close to two percentage points and underperforming all their peers across the globe. The benchmark indices not only extended the southward journey for third straight session but even breached the important psychological 5,100 (Nifty) and 16,900 (Sensex) levels.

Apart from the gloomy global tidings, the exacerbating concerns over depreciating Indian rupee took center stage in the session, prompting investors to ruthlessly square off hefty positions across the board. It turned out to be a freefall of sorts as the benchmark equity indices struggled to find a bottom in through the day and even drifted to the lowest levels in around three and half a month. The 50-share Nifty breached its 200 day moving average of 5,119.88.

Indian rupee crashed to Rs 53.82 against the US dollar and is dangerously close to the all-time low levels even as modest intervention by the country’s central bank on Thursday failed to stem the rupee’s slide. The immediate trigger for the decline has been a rising dollar demand from importers, but a deteriorating macroeconomic situation, years of policy uncertainty and decades of fiscal mismanagement, coupled with renewed risk-aversion among global investors is leading to weak foreign fund inflows, which is in turn widening the country’s budgetary deficit and further corroding its currency’s value.

Investors also fretted over weak cues from Asian markets, which mostly fell following the overnight fall in US markets on the back of disappointing economic reports and weakness in commodities. The European bourses too exhibited somber trends ahead of a crucial US jobs data and a potentially tumultuous weekend for European politics, which sees elections in France and Greece.

Back home, the Capital Goods counter got bludgeoned by close to four percent and remained the top laggard in the space while the rate sensitive-Banking pocket too bore the brutal brunt of hefty position squaring and plummeted by over three percent. The disappointing quarterly earnings announcement by bellwether Bank of Baroda did not go down well with investors. Amid the across the board carnage, the defensive Healthcare counter managed to keep its head above the water with moderate gains of around a quarter percent.

On the global front, cues from Asian region remained sluggish with most markets ending in the red terrain as investors grew increasingly worried over the global growth prospects after getting a worse than expected reading on the American non-manufacturing sector, amid lingering concerns over Euro-zone’s spiraling debt crisis and  slowing Chinese growth machine. On the other hand, the European markets too traded on a discouraging note as market participants cashed profits ahead of crucial US jobs data and significant elections in European nations over the weekend.

The NSE’s 50-share broadly followed index Nifty, suffered a sharp triple digit laceration to settle below the psychological 5,100 support level while Bombay Stock Exchange’s Sensitive Index - Sensex nosedived over three hundred points to finish above the crucial 16,800 mark. Moreover, the broader markets too finished on a bleak note with large cuts of around two percent largely in tandem with their larger peers.

The markets got thrashed on larger volumes of over Rs 1.46 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Thursday, at over Rs 1.11 lakh crore. The market breadth remained pessimistic through the day as there were 744 shares on the gaining side against 2,070 shares on the losing side while 100 shares remained unchanged.

Finally, the BSE Sensex shaved off 320.11 points or 1.87% to settle at 16,831.08, while the S&P CNX Nifty plunged by 101.55 points or 1.96% to close at 5,086.85.

The BSE Sensex touched a high and a low of 17,121.37 and 16,776.72 respectively. The BSE Mid cap and Small cap indices were down by 2.15% and 1.81% respectively.

The major gainers on the Sensex were Cipla up by 2.46%, Wipro up by 0.63%, Hindustan Unilever up by 0.30%, Sun Pharma up by 0.15%, and Tata Motors up by 0.02% while BHEL down by 4.93%, Hero MotoCorp down by 4.42%, SBI down by 4.39%, L&T down by 4.30% and Bajaj Auto down by 3.76% were the major losers on the index.

The only gainer on the BSE sectoral space was Health Care (HC) up by 0.24%, while Capital Goods (CG) down by 3.74%, Bankex down by 3.17%, Metal down 2.51%, PSU down by 2.49% and Realty down by 2.46% were major losers on the BSE sectoral space.

Meanwhile, the government is expected to start auctioning coal blocks within the next two months, as per Coal Minister Sriprakash Jaiswal. The government has identified 54 coal blocks that will be auctioned to companies for industrial use. The acquiring companies will now be able to mine the dry fuel for their own requirements.

Keeping in view the increasing energy needs of the country, the government has also decided to set up a sovereign fund which will help coal companies acquire assets abroad. The fund will provide financial assistance to coal companies from the government for acquiring large assets.

 The country has been facing acute shortage of coal in the recent months. Coal is critical for power generation in the country. The recent scarcity of coal has hurt not only the power companies but various other sectors also.

The government, in its attempt to solve the woes of the power sector, has forced Coal India to sign fuel supply agreements (FSA) with power companies. As per the FSAs Coal India is required to supply coal to the power companies to the extent of 80% of their requirements, even if it means importing coal from abroad. The demand supply gap of coal was estimated to be 142 million tonne in the last fiscal.

The S&P CNX Nifty touched a high and low of 5,177.20 and 5,070.60 respectively.

The top gainers on the Nifty were Cipla up by 2.93%, Sun Pharma up by 0.83%, Wipro up by 0.64%, Asian Paints up by 0.42% and Tata Motors up by 0.35%.

On the flip side, Bank of Baroda down by 6.23%, PNB down by 5.07%, BHEL down by 5.04%, Axis Bank down by 4.75%, and SBI down by 4.66% were the top losers on the index.

The European markets were trading mixed, as France's CAC 40 up 0.09%, Britain’s FTSE 100 down 0.72%, while Germany's DAX was down by 0.49%.

Asian equity indices exhibited a mixed close on last trading day of the week as traders turned cautious ahead of the all important jobs data from the world’s biggest economy. However, traders’ sentiments were supported by encouraging services sector data out of China. The Chinese service sector expanded at the fastest pace in six months in April, easing concerns over the slowdown of the world's second largest economy amid poor manufacturing performance. The headline HSBC business activity index rose to a six-month high of 54.1 in April from 53.3 in March. The index reading above 50 indicates expansion of the sector and a reading below 50 suggests contraction. The improvement was supported by the growth in new orders, which was the strongest in ten months.

Meanwhile, Hong Kong shares slipped by over half a percent, with Chinese property developers weak after the biggest player by sales posted its first monthly sales decline. Stock markets in Japan remained closed for the trade on Friday on account of Greenery day.