Key benchmark indices extended initial losses and the rupee slumped to hit record low below 68 against the dollar as investors continued to dump emerging market assets over fears of a possible US military intervention in Syria. The S&P BSE Sensex hit its lowest level in almost a year. The 50-unit CNX Nifty hit its lowest level in nearly 11 months. The Sensex was down 373.46 points or 2.08%, off about 260 points from the day's high and up close to 5 points from the day's low. The market breadth, indicating the overall health of the market, was weak.
PSU OMCs declined and Cairn India rose as crude oil prices climbed on concern that conflict in Syria may spread to other parts of the Middle East and threaten oil supplies. Shares of upstream PSU oil and gas firms dropped on worries of higher subsidy burden, with ONGC and Oil India hitting 52-week low. HDFC and L&T hit 52-week low. Index heavyweight and cigarette maker ITC fell.
The market dropped in early trade as investors continued to dump emerging market assets over fears of a possible US military intervention in Syria. The market extended initial losses and hit fresh intraday low in morning trade.
Investor sentiment has also been hit adversely on concerns about government finances after the Lok Sabha on Monday, 26 August 2013, passed the Food Security Bill. The massive outlay of funds required for rolling out the programme is bound to raise the government's fiscal deficit.
The market sentiment was also affected adversely by data showing that foreign funds remained net sellers of Indian stocks on Tuesday, 27 August 2013. Foreign institutional investors (FIIs) sold shares worth a net Rs 1373.99 crore on Tuesday, 27 August 2013, as per provisional data from the stock exchanges.
The rupee hit a record low below 68 against the dollar. The partially convertible rupee was trading at 68.52 against the dollar, sharply lower than its close of 66.24/25 on Tuesday, 27 August 2013. Rupee depreciation fuels inflation, increases import bill and current account deficit. It also increases the government's spending on fuel subsidies, potentially widening the fiscal deficit.
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The market is expected to remain volatile in the near future as traders roll over positions in the futures & options (F&O) segment from the near month August 2013 series to September 2013 series. The near month August 2013 derivatives contract expire tomorrow, 29 August 2013.
Stocks fell across the globe on geopolitical worries after media reports on Tuesday, 27 August 2013, said that the White House plans to publicly release evidence early as Thursday of how Syria's regime used chemical weapons against civilians. The Office of the Director of National Intelligence is assembling the report which is one of the final steps before the US commits to a military strike against Syrian government targets, media reports said. The UK, France and Turkey have all signaled they are willing to assist in a military strike, the report said.
At 10:20 IST, the S&P BSE Sensex was down 373.46 points or 2.08% to 17,594.62. The index tumbled 376.71 points at the day's low of 17,591.37 in morning trade, its lowest level since 7 September 2012. The index declined 116.64 points at the day's high of 17,851.44 in opening trade.
The CNX Nifty was down 107.70 points or 2.04% to 5,179.75. The index hit a low of 5,168.50 in intraday trade, its lowest level since 5 October 2012. The index hit a high of 5,236.05 in intraday trade.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,103 shares fell and 405 shares rose. A total of 72 shares were unchanged.
Among the 30-share Sensex pack, 23 stocks fell and rest of them rose. Bhel (down 5.62%), ICICI Bank (down 4.67%) and Reliance Industries (down 3.83%), edged lower.
Index heavyweight and cigarette maker ITC lost 3.25%.
PSU OMCs declined as crude oil prices climbed. BPCL (down 7.44%), HPCL (down 6.05%) and Indian Oil Corporation (down 4.92%), edged lower.
US crude oil futures extended Tuesday's steep gains on worries that a potential military strike against Syria could disrupt the region's oil supplies. US crude oil futures for October delivery jumped 2.32%, to $111.54 a barrel in electronic trading today, 28 August 2013. US crude oil futures for October delivery had surged 2.9%, to $109.01 a barrel on Tuesday. Higher crude oil prices could increase under-recoveries of PSU OMCs. PSU OMCs suffer under recoveries on domestic sale of diesel, LPG and kerosene at controlled prices. In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals while completely deregulating diesel prices sold to institutional or bulk buyers. The government has already freed pricing of petrol.
The weakness in rupee also raised concerns about increased costs of importing oil. PSU OMCs import about 70-75% of their crude oil needs and rely heavily on foreign currency borrowings, which largely remain unhedged.
Cairn India rose 3.64% on higher crude oil prices. The rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms such as Cairn India.
Shares of upstream PSU oil and gas firms dropped on worries of higher subsidy burden. Oil India lost 2.25% to Rs 433 after hitting a 52-week low of Rs 430.25 in intraday trade today, 28 August 2013.
ONGC dropped 6.02% to Rs 243.65 after hitting a 52-week low of Rs 239.05 in intraday trade today, 28 August 2013.
GAIL (India) fell 1.14%.
Three state-run upstream oil firms -- Oil India, ONGC and GAIL (India) -- share part of the under-recoveries of state-run oil refining-cum-market firms arising from the government-imposed price caps on three key fuels -- diesel, LPG for domestic use and kerosene sold through the public distribution system.
L&T declined 1.5% to Rs 694.55 after hitting a 52-week low of Rs 682.90 in intraday trade today, 28 August 2013.
HDFC declined 5.51% to Rs 649 after hitting a 52-week low of Rs 644.80 in intraday trade today, 28 August 2013.
Rural Electrification Corporation lost 3.2% as the stock turned ex-dividend today, 28 August 2013, for a final dividend of Rs 1.50 per share for the year ended 31 March 2013. Meanwhile, Rural Electrification Corporation (REC) after market hours on Tuesday, 27 August 2013 said it has filed shelf prospectus and prospectus tranche-I in respect of proposed public issue of tax free secured redeemable non-convertible bonds, in the nature of debentures, during the financial year 2013-14, with the Registrar of Companies (RoC), NCT of Delhi and Haryana on 27 August 2013. The public issue of tax free secured redeemable non-convertible bonds, in the nature of debentures of REC will open on 30 August 2013 for subscription and is scheduled to close on 23 September 2013.
Asian stocks dropped for a second day in a row on Wednesday, 28 August 2013, on concern the US will take military action against Syria. Key benchmark indices in Singapore, Hong Kong, Indonesia, China, South Korea and Japan fell by 0.24% to 2.76%. Taiwan's stock market rose 0.06%.
Trading in US index futures indicated that the Dow could gain 13 points at the opening bell on Wednesday, 28 August 2013. US stocks fell hard on Tuesday, with the Dow Jones Industrial Average ending at a two-month low, as unease over possible US action against Syria shook global markets.
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