Markets continued reeling in red on European concern and rupee plunge

Indian equity markets snapped the lackluster Wednesday with a cut of about another half a percent. The day that started on a sluggish note under impression of weakness in the other global markets, never looked confident, as the domestic currency slumped to fresh all time low, breaching 56 per dollar mark. Rupee, which made a weak start made some recovery as RBI reportedly sold dollars at the rate of 55.75 through PSU banks, but wilted under the importers heavy demand of dollar. Currency traders remained reluctant to be more aggressive against such a sharp decline in the rupee. The RBI too seemed to have refrained from heavy dollar selling considering the situation a global risk aversion.

Earlier the markets made a soft start as the US markets closed mostly in red, while the Asian markets traded on a weak note after former Greek Prime Minister Lucas Papademos was reported saying that preparations for an exit are being considered by Greece. The report ahead of the meet of European leaders to discuss ways to soften austerity measures, causing political turmoil in Greece and other nations, soured the mood of investors’ worldwide. Later a very weak start by the major European markets weighed heavily on the already reeling in red domestic markets.

Domestic markets, though in red continued their range-bound trade till noon but once the rupee lost its direction despite some reported RBI intervention, the stocks followed the trend and slipped to their lows of the day. However, there was some recovery attempt, supported by the gains in some banking stocks, but they too gave up under pressure and markets by the end closed lower by half a percent.

On the sectoral front, Consumer Durables (CD) along with Capital Goods and Realty suffered the most, while the metal sectors stocks too lost about a percent tailing their global peers. There was speculation that government could raise fuel prices following the sharp depreciation in rupee, the buzz helped the PSU oil marketing companies to some extent but made adverse impact on the auto stocks. Tata Motors lost 1.19% and Maruti Suzuki was down by 0.17%. IT sector that got some advantage of depreciating rupee and the defensive healthcare sector, could only manage a green close and that too marginally, otherwise all the sectoral gauges closed in red.

There were some stock specific actions based on result announcements and some individual reasons. A2Z Maintenance and Engineering Services rallied and closed with gains of over 5 percent after the report that Rakesh Jhunjhunwala and his wife bought shares worth Rs 26.5 crore of the company. While, GAIL (India) gained over 3 percent after signing the gas sale and purchase agreement (GSPA) with TurkmenGaz, Turkmenistan’s national oil company, for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Gas Pipeline Project.

The broader indices performed in tandem with their larger counter parts and lost about half a percent. BSE Midcap index lost 0.41%, while the BSE Smallcap index was down by 0.58%. Market breadth remained in the favour of declines with 1,095 stocks advancing against 1,618 declines. The overall turnover remained on the higher side compared to last session.

Finally, the BSE Sensex lost 78.31 points or 0.49% to settle at 15,948.10, while the S&P CNX Nifty declined by 24.85 points or 0.51% to close at 4,835.65.

The BSE Sensex touched a high and a low of 16,002.03 and 15,847.03 respectively. The BSE Mid cap and Small cap indices were down by 0.41% and 0.58% respectively.

The major gainers on the Sensex were Gail India up by 3.19%, Wipro up by 1.15%, SBI up by 0.93%, M&M up by 0.84% and Coal India up by 0.72%, while Bharti Airtel down by 4.29%, Tata Power down by 1.99%, Hero MotoCorp down by 1.86%, Jindal Steel down by 1.84% and Sterlite Industries down by 1.51% were the major losers on the index.

The only gainers on the BSE sectoral space were IT up by 0.16% and Health Care (HC) up by 0.15%, while Consumer Durables (CD) down by 2.08%, Capital Goods (CG) down by 0.89%, Realty down by 0.86%, Metal down 0.72% and Auto down by 0.68% were top losers on the BSE sectoral space.

Meanwhile, imports of gold and silver have risen substantially during the period 2009-12, as per government data. Imports of the precious metals increased to $61.5 billion in FY ‘12 as compared to $42.5 billion in 2010-11 and $22.8 billion in FY ’09. This information was given by Minister of State for Finance, Namo Narain Meena in a written reply to the Rajya Sabha. Meena has also stated that the volatility in the prices of gold and silver have been noticed due to their volatility in the prices of these commodities in the international markets.

India is the largest consumer of gold in the world as per the World Gold Council and a net importer of the bullion. Of late the imports of the precious metal have been on the rise leading to the increase in the current account deficit (CAD) of the country. The CAD of India increased from 3.3% in Dec 2010 to 4% on Dec 2011.

Apart from petroleum products, imports of gold and silver were major contributors towards the deficit. In an attempt to discourage the imports of gold and silver, the Finance Minister in Budget for 2012-13 proposed to increase basic customs duty on standard gold bars, gold coins of purity exceeding 99.5% and platinum from 2% to 4%. Besides, customs duty on non-standard gold was increased to 10% from 5%. The RBI too has taken measures to curb the loans given out by NBFCs against gold.

The S&P CNX Nifty touched a high and low 4,853.75 and 4,803.95 respectively.

The top gainers on the Nifty were GAIL up by 3.54%, Ranbaxy up by 1.73%, IDFC up by 1.39%, M&M up by 1.34% and Dr Reddy’s up by 1.24%.

On the flipside, Bharti Airtel down by 4.68%, Kotak Bank down by 3.91%, Sesa Goa down by 3.78%, Bank of Baroda down by 2.17% and Tata Power down by 2.10% were the top losers on the index.

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

After a relief rally on Tuesday, all the Asian equity indices snapped the day’s trade in the negative terrain on Wednesday on growing pessimism over a European summit later in the day. Moreover, the sentiments in the region also dampened after former Greek Prime Minister late Tuesday said that plans for the debt laden nation’s exit from the single currency union are being considered. He also added that there is only limited room for the country to negotiate its loan program. In addition to renewed European worries, there were also concerns over the region’s second largest economy growth, as Japan posted a higher-than-anticipated trade deficit in April-exports of steel and plastic declined as the import of fossil fuels increased.

Meanwhile, Hang Seng and Shanghai Composite tumbled 1.33% and 0.42% respectively as investors spooked by renewed fears of a Greek exit from the euro zone. Moreover, Japanese Nikkei crumbled about 2% as exporters took a beating on a firmer yen. However, the Bank of Japan on Wednesday left its key interest rate unchanged at near zero. In addition, selling in blue chips dragged KOSPI near its crucial 8,800 mark, down by over a percentage point.