Mumbai, Aug. 20: The Sensex today plunged over 330 points, in sync with the rupee breaching the 64-mark to the dollar, but regained lost ground to end just 61 points lower, following the recovery of the currency from record lows.
While suspected RBI intervention lifted the battered domestic currency from an yet another all-time low of 64.13 to the dollar to close at 63.25, emergence of value buying in beaten down shares helped the 30-share Sensex to rebound.
For the first time ever, the rupee slipped below the 100-mark against the pound.
The Sensex resumed trading today lower and dipped below the 18000-mark for the first time since September 2012 to a low of 17970.98. However, helped by value-buying, it settled the day at 18246.04, a fall of 61.48 points, or 0.34 per cent.
A feeling that the fall in the rupee’s value may also have been overdone saw the currency recovering from its depths.
Dealing room circles said exporters sold dollars later in the day, which also helped in the rupee’s recovery.
The currency touched the day’s high of 63.15, before settling at 63.25, a fall of 12 paise over yesterday’s close.
Forex circles say the attention of the market is now entirely on the minutes of the US Federal Open Market Committee meeting to be released on Wednesday.
The minutes are expected to give some indication on whether the US Federal Reserve would proceed with the tapering of bond purchases and when the exercise would begin.
However, it is felt that the underlying sentiment against the currency is bearish and that it may try to hit the 65-mark unless the government announces fresh reform measures.
Speaking to The Telegraph, Mohan Shenoi, chief treasurer at Kotak Mahindra Bank, said the recent fall in the rupee’s value was a combination of both sentiment and fundamentals.
He, however, said using the interest rate tool to impact currency volatility had now resulted in currency, equity and debt markets feeding on each other, a hint that the central bank should detach its rupee protection measures so as to allow other markets to function normally.
“Concentrated measures and efforts by the RBI are likely to have an impact in the long run but in the short-term, the rupee is expected to witness a bearish ride,” Dinesh Thakkar, chairman & managing director of Angel Broking, said.
The depreciating rupee has sent shock waves across the capital markets with the Sensex losing over 1100 points in three days.
The 50-issue CNX Nifty of the NSE declined further by 13.30 points to end at nearly 12-month lows of 5401.45. It touched an intra-day low of 5306.35 today.
The fall in Tata Motors, TCS, HDFC, Sun Pharma, M&M and ONGC contributed to the Sensex loss,while a rise in ICICI Bank, Sterlite, HUL, SBI and Tata Steel broke the fall to a major extent.
Consumer durables, auto, pharmaceuticals and IT shares were at the receiving end, while stocks from metal and realty attracted buying interest.
“The Indian equity market is passing through an extremely volatile phase, where the broader trend is down. And clearly the selling pressure in the market is due to weak macros, weaker outlook on macros, and the sharp rise in the dollar against the rupee,” said Milan Bavishi, head research, Inventure Growth and Securities.
“The RBI had to intervene today as state-run banks sold dollars to curb the currency's weakness. The rupee recovered from its day’s low. However, it remains a major cause of concern for Indian markets at present,” said Nidhi Saraswat, senior research analyst, Bonanza Portfolio.
Standard & Poor’s today said it will maintain a negative outlook for India as currency depreciation is adversely impacting investor confidence.
“We maintain a negative outlook on India’s BBB- sovereign credit ratings,” the agency said.
BBB- is the lowest investment grade and a downgrade would mean pushing the country’s sovereign rating to junk status, making overseas borrowings by corporates costlier.