Financial, bank, IT and real estate stocks hit hard.
By R. Chandrasekaran
CHENNAI: The Indian currency hit a fresh low on Tuesday and hurt the equity markets, dragging the major index over 2.3 percent. The financial stocks were the worst hit in the melee. Even the IT stocks were not spared.
The Rupee continued to dip due to the strengthening USD globally amidst higher bond yield in the U.S. triggering outflow of money, especially from emerging economies as the business confidence contracted in the region.
The Indian currency had hit a life time low 61.80 during the day on Tuesday, surpassing the previous low of 61.21 recorded on July 8. This triggered panic among investors, who started dumping stocks, particularly the rate-sensitive such as financials and real estate.
While the Bombay Stock Exchange’s 30-share barometer dropped 2.34 percent or 449.22 points to close below the psychological 19,000 mark to 18,733.04, the National Stock Exchange’s Nifty plummeted 2.52 percent or 143.15 points to end the day at 5,542.25 points.
The BSE’s Bankex index slumped 449.51 points or 3.90 percent to 11,082.14 points as most of the banking stocks witnessed a minimum loss of 3 percent. This included private sector banks such as HDFC Bank, ICICI Bank, Yes Bank, and Axis Bank.
Another sectoral index, BSE’s consumer durables also recorded a worst fall of 5.55 percent or 358.70 points to finish the day at 6103.90 points since the consumers are expected to postpone their plan of purchasing consumer durables in view of rising interest costs.
The realty sector, which too bore the brunt of higher interest costs, registered a fall of 4.45 percent or 54.14 points, to end the day at 1162.47 points.
Other major sectoral indices such as BSE’s auto, healthcare, FMCG, capital goods, power, metals, oil & gas have also witnessed a drop of 0.69 percent, 1.05 percent, 2.02 percent, 2.56 percent, 3.21 percent, 3.24 percent and 2.65 percent, respectively.
The IT sector, which benefits from the falling Indian currency, too joined the selling party as the IT index suffered 0.46 percent or 34.77 points fall on Tuesday.
The significant drop in the Indian equity markets on Tuesday on the back of a sharp fall in Indian currency suggests that the recent measures of the Reserve Bank of India failed to withstand the global pressures and proved to be a short-term cure only. This could force the central bank to ponder over more measures to curb the volatility in the Indian rupee.
To contact the author, email to rchandrasekaran@americanbazaaronline.com