Equity indices nursed losses for the second consecutive session on Tuesday as investors continued to dump IT, banking and FMCG stocks amid a bearish trend in global markets. Unabated foreign fund outflows and the rupee dropping to another record low against the US dollar added to the woes, traders said. Participants were also in wait-and watch mode ahead of release of retail inflation and factory output data.
Rupee hits more than two-year low; RBI intervenes
India's current account slipped into a deficit of $9.6 billion or 1.3 per cent of GDP in the September quarter, the Reserve Bank said on Friday. The current account, which records the value of exports and imports of both goods and services along with international transfers of capital, was in a surplus mode both in the quarter-ago and year-ago periods. India's current account surplus had stood at $6.6 billion or 0.9 per cent of GDP in the April-June 2021 quarter, while in the year-ago period (Q2FY22), the surplus had stood at $15.3 billion or 2.4 per cent of the GDP, the data said.
A weak dollar overseas failed to restrict the rupee's decline, a forex dealer said.
The Securities and Exchange Board of India's (Sebi's) board on Wednesday allowed foreign portfolio investors (FPIs) to trade in exchange-traded commodity derivatives. The move, it said, "will enhance liquidity and market depth, as well as promote efficient price discovery." Overseas investors will only be allowed to deal in non-agricultural commodity derivatives and only cash-settled contracts.
Investors remained cautious in the face of the expiry of November series contracts in the derivatives segment, which also dampened sentiment.
The rupee rose by 12 paise to close at 79.78 against the US dollar on Monday due to a weak dollar in overseas markets and an improved appetite for riskier assets. Stronger regional currencies also supported the rupee sentiment ahead of the US Fed policy decision on Wednesday. Weak domestic equities and FII outflows, however, capped sharp gains. At the inter-bank forex market, the local unit opened at 79.86 against the greenback and moved in a range of 79.70 to 79.87 in the day trade.
HUL was the top loser in the Sensex pack, shedding around 4 per cent, followed by Maruti, HDFC Bank, PowerGrid, IndusInd Bank, HCL Tech and Bajaj Finserv. On the other hand, Axis Bank, SBI, ONGC and ICICI Bank were among the gainers. NSE Nifty fell 149.95 points to 13,817.55.
The rupee is trading weak against the dollar in afternoon trade.
Indian corporates might face higher borrowing cost in the overseas market in short-run due to the Greek debt crisis.
Weak equity markets too hit rupee sentiment
Volatile currency market sentiment across Asia following a fresh round of China's yuan depreciation further added to gloom.
Sharp rate hike in Russia further raised concerns about the global economy.
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Else, more capital outflow and pressure on rupee likely.
The global brokerage firm believes that CRR cut is likely to help cut lending rates and revive growth sentiments.
Whatever the critics may say, the numbers suggest that India continues to be a favourite destination for foreign investors.
In worldwide trade, the US dollar retreated from its recent multi-year highs to trade subdued against major rival currencies
NSE Nifty, after shuttling between 10,809.60 and 10,725.90, finished 30.95 points, or 0.29 per cent lower at 10,741.10.
BSE benchmark Sensex nursed losses on Friday as investors pocketed gains after a five-session winning streak amid a bearish trend overseas. A depreciating rupee and foreign fund outflows further soured risk sentiment, traders said. The 30-share gauge, which had started the trade on a firm note, soon gave up all the gains and finally ended 651.85 points or 1.08 per cent lower at 59,646.15. The broader NSE Nifty snapped its eight-day rally to close at 17,758.45, down 198.05 points or 1.10 per cent.
Titan was the top loser in the Sensex pack, shedding over 3 per cent, followed by M&M, HUL, Maruti, Asian Paints and IndusInd Bank. Nifty fell 91 points to 17,157.40.
The local currency recovered some ground after the Reserve Bank of India (RBI) was said to have stepped in through state-run banks, helping the rupee to end at 64.30, a fall of 110 paise or 1.74 per cent.
The balance sheet of the Reserve Bank plays a critical role in the functioning of the country's economy.
Since 2000, China has had the world's largest outflow of HNIs.
The measures to reduce the current account deficit should have focused far more on narrowing the trade imbalance, principally through export facilitation and linked FDI, says Nitin Desai.
The BSE on Monday slipped below the crucial Rs 100-lakh crore (Rs 100 trillion) mark as the benchmark Sensex lost 261 points.
A strengthening dollar, rising interest rates, tightening liquidity and a surge in oil prices - all are combining to create a toxic atmosphere for EM assets, says Akash Prakash.
Foreign portfolio investor (FPI) flows into India may remain tepid in 2022, said a recent note by Goldman Sachs, who now peg the foreign portfolio investment into India at $5 billion in 2022, down from their earlier forecast of $30 billion with risks skewed to the downside. "There has been $15 billion of equity outflows YTD in India already, and the IPO of the largest insurance company has been pushed out. "Additionally, with no mention of India's inclusion in global bond indices in the Union Budget, there are risks to our already conservative base case assumption of an announcement of India's likely inclusion into the GBI-EM Global Diversified Bond Index in Q4-2022," wrote Andrew Tilton, Goldman Sachs' chief Asia-Pacific economist in a co-authored report with Santanu Sengupta and Suraj Kumar.
Tech Mahindra, the top loser in the Sensex pack, shed over 2.5 per cent. It was followed by UltraTech Cement, Reliance Industries, HCL Tech, HDFC, Kotak Bank, HDFC Bank and TCS. NSE Nifty plunged 179.35 points to 17,745.90.
The rupee appreciated 7 paise to 79.74 against the US dollar in early trade on Thursday as a positive trend in domestic equities supported the local unit. However, a strong American currency overseas and forex outflows restricted the rupee's gain, dealers said. At the interbank foreign exchange, the rupee opened at 79.72 against the American dollar, then went lower to trade at 79.74 against the greenback in early deals, registering a gain of 7 paise over the last close.
BSE Sensex on Monday closed nearly 34 points higher at 26,350.17 with gains in realty, power, FMCG and oil & gas stocks amid sustained buying by domestic institutional investors.
However, it is noteworthy that foreign investors pumped in money on the day of election results as the mandate became clear
The proposed Rs 10,000 crore (Rs 100 billion) of bond purchase would be done on Monday.
Foreign investors are betting top dollar on the country as growth is likely to recover at a time when other emerging markets are battling macroeconomic adjustments.
The rupee dropped on renewed demand for the American currency.
'It is time to allow the rupee to move towards its true value, as it is hurting Indian exports, investment and SMEs associated with export sectors that create jobs,' argues Pravakar Sahoo.
Of $90 billion remittances that India is expected to receive in 2022, only $27.4 billion has come in the first half of the year.
Demonetisation, Donald Trump's surprise victory in the US presidential elections, and the fear that US Fed may hike rates in the upcoming policy review in December have dented market sentiments, report Puneet Wadhwa & Deepak Korgaonkar.
The US currency's decline against major world currencies alongside fag-end dollar supply largely helped the rupee recoup some of its initial losses
Many years during which monsoons were poor saw high returns, while normal or excess rainfall has also coincided with poor calendar year gains.
The broader NSE Nifty closed 1.25 points, or 0.01 per cent down at 10,564.05.
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