Bears further tightened their grip on Dalal Street as the Sensex plunged more than 800 points to close over three-month low on Thursday. Crude oil prices touched fresh four-year high and rupee hit record low raised fears of a broadening current account deficit.
In addition, the government asked oil marketing companies to absorb Re 1 per litre on petrol and diesel also dented investors sentiment. Traders also remained cautious ahead of three-day Monetary Policy Committee’s rate decision due on Friday.
The fall in global markets on hawkish comments from the US central bank, too, caused selling pressure. More than Rs 3.3 lakh crore of investors’ wealth eroded in a single day.
The 30-share BSE Sensex tanked 806.47 points or 2.24 percent to 35,169.16 and the 50-share NSE Nifty closed tad below 10,600 levels, falling 259 points or 2.39 percent to 10,599.30.
“The strongest of businesses & the bluest of blue chips have cracked in the last couple of sessions, which highlights the prevailing negative sentiment & an environment of pessimism,” Devang Mehta, Head – Equity Advisory, Centrum Wealth Management told Moneycontrol.
He said anxieties over the Reserve Bank of India (RBI) adopting an aggressive stance in its monetary policy due to a rise in inflationary pressure led to an erosion in investors’ risk appetite.
“With deteriorating macros, all eyes will now be on the second quarter earnings & how the current liquidity situation is addressed,” he added.
All sectoral indices caught in bear trap with the Nifty FMCG, IT and Pharma falling 3 percent each. The broader markets also fell in line with frontliners as the Nifty Midcap and Smallcap indices were own 2 percent each.
The Nifty has not only breached its crucial support today but also closed around the day’s low, which shows that bears are in control and participants have no option but to align their positions accordingly, Jayant Manglik, President, Religare Broking said.
He reiterated his view to prefer trading through options instead of naked futures, citing excessive volatility. “Nifty has next support around 10,400.”
The rupee collapsed to a fresh low of 73.82 intraday against the US dollar amid rising global oil prices, deepening concerns about the current account deficit and capital outflows. The currency fell 24 paise to close at 73.58 a dollar today and depreciated 15.5 percent year-to-date, effectively becoming the worst performing Asian currency.
“It is weighed by the double whammy of a stronger USD along with rising crude oil prices. The government and RBI’s measures to contain rupee volatility have been overshadowed by prospects of worsening current account deficit along with turmoil in various EM markets. As such, short-term move in oil prices remain triggers for a move in the rupee,” ICICI Securities said.
HPCL, BPCL and IOC were biggest losers among Nifty50 stocks, falling 11-13 percent after Finance Minister Arun Jaitley said the government cut excise duty on petrol & diesel by Rs 1.50 per litre and asked oil marketing companies to absorb Re 1 per litre w.r.t petrol & diesel prices.
Reliance Industries (down 6.87 percent), Eicher Motors (5.71 percent), TCS (4.5 percent), ONGC (5 percent), HDFC Bank (3.6 percent), Hero MotoCorp (5.15 percent) and Dr Reddy’s Labs (4.7 percent) were other major losers.
ICICI Bank bucked the trend, rising 4.21 percent after Chanda Kochhar resigned as MD & CEO of the bank. Axis Bank (up 2.45 percent), UltraTechCement (2.16 percent), Bharti Infratel (1.77 percent), Yes Bank (1.06 percent) and L&T (1 percent) were other gainers.
Global markets were under pressure as investors digested comments from the US Federal Reserve chief and closely monitor events in Italy. France’s CAC and Britain’s FTSE were down 1 percent each at the time of writing this article. Asian peers Japan’s Nikkei lost half a percent and Hong Hang’s Hang Seng declined 1.7 percent.