MUMBAI: The combination of the weakening rupee and firming crude prices returned to haunt Dalal Street on Monday. Stock indices — the Sensex and the Nifty — fell almost 0.9per cent after the rupee extended its record-losing spree against the dollar. Concerns among foreign investors over Sebi’s circular on restricting select foreign portfolio inflows also affected sentiment.
The Sensex declined 333 points, or 0.86per cent, to close at 38,312; while the Nifty fell 98.15 points, or 0.84per cent, to end at 11,582.35. Consumer stocks led the selloff with Hindustan UnileverNSE -3.05 % dropping 4.6per cent. “The Indian market which was at overbought zone corrected Monday due to a sharp declined in the rupee against the dollar, rise in crude oil price and Sebi’s plans for the fresh criteria to stop dubious money flowing into the country” said A K Prabhakar, head of research, IDBI Capital. “It’s important for the market to know how the government will deal with this situation.” Early last week, the indices had hit record highs, outperforming most emerging markets.
The regulatory uncertainty is weighing down sentiment. The Securities and Exchange Board of India, in April, said NRIs (nonresident Indians) and PIOs
(Persons of Indian Origin) cannot be ‘beneficial owners’ (BO) of FPIs. Foreign fund managers said the rule could lead to outflows of up to Rupee7,500 crore.
The rupee lost 0.31per cent to 71.21 against the dollar as some large foreign banks were seen buying dollars on behalf of their clients. The Reserve Bank of India intervened as some state-owned banks were seen selling dollars although intensity was less, said sources.
“There was a large dollar demand towards the end of market hours amid overseas investment outflows,” said K N Dey, founder — United Financials, a Mumbaibased forex firm. Overseas investors have turned apprehensive after the authorities raised concerns over source of foreign portfolio investment.”
“The rupee may remain under pressure as overseas investors were seen selling domestic securities amid a bout of different worries,” he said.
The benchmark bond yield rose five basis points to close at 8per cent, highest closing level since December 1, 2014. Bond yields and prices move in opposite directions.
On Monday, Brent crude oil was up 45 cents at $78.09 a barrel.
In Indian stocks, both domestic and foreign funds were net sellers on Monday. While mutual funds sold stocks worth Rupee542 crore, foreign institutional investors’ net selling was at Rupee21 crore.
Source: economictimes.indiatimes.com