Key benchmark indices tumbled and hit fresh intraday low in mid-afternoon trade as the rupee hit record low below 64 against the dollar on rising expectations that the US Federal Reserve will soon start withdrawing its monetary stimulus to the US economy. The S&P BSE Sensex was currently above the psychological 18,000 mark after falling below that mark in mid-afternoon trade. The Sensex was down 240.90 points or 1.33%, off close to 560 points from the day's high and up about 10 points from the day's low. The market breadth, indicating the overall health of the market, turned negative from positive. Indo-Pak tension also weighed on the bourses after the Pakistani military reportedly said on Wednesday that one of its officers has been killed by Indian troops firing across the disputed border in the Kashmir region.
Index heavyweight and cigarette maker ITC extended intraday losses. Maruti Suzuki India rose after the company announced the launch of a new car model Stingray. L&T reversed intraday gains.
The market surged amid initial volatility after the Reserve Bank of India (RBI) on Tuesday, 20 August 2013, announced measures to increase the availability of cash in the banking system. The Sensex trimmed gains to hit fresh intraday low in morning trade. A bout of volatility was witnessed as key benchmark indices trimmed gains once again to hit fresh intraday low after regaining strength in mid-morning trade. Key benchmark indices pared steep initial gains amid volatility to hit fresh intraday low in afternoon trade. The market extended intraday losses as rupee weakened past 64 against the dollar to hit a record low.
The rupee hit record low below 64 against the dollar on rising expectations that the US Federal Reserve will soon start withdrawing its monetary stimulus to the US economy. The rupee was hovering at 64.20, sharply lower than its close of 63.25/26 on Tuesday, 19 August 2013.
Indo-Pak tension also weighed on the bourses after the Pakistani military reportedly said on Wednesday that one of its officers has been killed by Indian troops firing across the disputed border in the Kashmir region. The incident follows the killing of five Indian soldiers along the Line of Control that separates the two sides in the Himalayan region this month. India said the five were killed by Pakistani forces but Pakistan denied involvement.
At 14:20 IST, the S&P BSE Sensex was down 240.90 points or 1.33% to 18,003.19. The index tumbled 249.07 points at the day's low of 17,996.97 in mid-afternoon trade. The index surged 321.66 points at the day's high of 18,567.70 in early trade, its highest level since 19 August 2013.
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The CNX Nifty was down 47.60 points or 0.88% to 5,353.85. The index hit a low of 5,340.60 in intraday trade. The index hit a high of 5,504.10 in intraday trade, its highest level since 16 August 2013.
The market breadth, indicating the overall health of the market, turned negative from positive. On BSE, 1,157 shares fell and 990 shares rose. A total of 153 shares were unchanged.
Among the 30-share Sensex pack, 18 stocks fell and rest of them rose. Dr Reddy's Laboratories (down 3.57%), Sterlite Industries (down 2.62%), Sun Pharmaceutical Industries (down 2.97%), edged lower.
Jindal Steel & Power gained 3.01%, with the stock reversing intraday losses.
Maruti Suzuki India rose 1.21% after the company said during market hours today, 21 August 2013, that it has introduced the stylish, aggressive, sporty Stingray car model. With this the company has expanded its portfolio and enriched to meet inspirations of young India, Maruti said. Stingray, which is powered by a 998 cc petrol engine, is available in three variants, with price ranging between Rs 4,09,999 to Rs 4,66,999 ex showroom Delhi.
Index heavyweight and cigarette maker ITC declined 3.32%, with the stock extending intraday losses.
Reliance Industries (RIL) fell 2.3%.
L&T shed 1.33% to Rs 723.50, with the stock reversing intraday gains. The stock had hit a 52-week low of Rs 710.10 in intraday trade on Monday, 19 August 2013. The company on Tuesday, 20 August 2013, said it has won an order valued around Rs 1500 crore from Petroleum Development Oman LLC (PDO). The engineering, procurement and construction (EPC) order is for the Yibal 3rd stage depletion compression (Y3DC) project at the Yibal-Natih gas reservoir in Oman. The project is scheduled to be completed in 39 months.
The RBI on Tuesday, 20 August 2013, said it would repurchase government bonds to increase the availability of cash in the banking system, a step that appears to be a partial reversal of the slew of measures it took since mid-July to tighten liquidity. In a late evening news release, the RBI said it would buy back Rs 8000-crore of government bonds on Friday, 23 August 2013. Further repurchase will depend on evolving market conditions, it said. It is important to ensure that the liquidity tightening doesn't harden long-term bond yields and impact the flow of credit to productive sectors of the economy, the central bank said, referring to its buyback plan.
The RBI on Tuesday also relaxed some rules that will help banks deal with the notional or marked-to-market (MTM) loss in their government bond portfolios due to a recent sharp fall in bond prices. They now don't have to record their current marked-to-market losses immediately as the RBI has allowed them to spread the losses equally over the remaining period of this fiscal year.
Bond prices surged after the RBI on Tuesday, 20 August 2013, announced measures to increase the availability of cash in the banking system. The yield on the benchmark federal paper 7.16% GS 2023 was hovering at 8.4065%, lower than its close of 8.9028% on Tuesday, 19 August 2013. Bond yield and bond prices are inversely related.
European stock markets were mostly lower on Wednesday, 21 August 2013, with investors remaining cautious ahead of minutes from the US Federal Reserve's latest meeting, which could shed more light on a potential tapering of asset purchases. Key benchmark indices in UK and Germany were down by 0.18% to 0.49%. France's CAC 40 rose 0.31%.
Asian stocks were mixed on Wednesday, 21 August 2013, before the release of minutes of the Federal Reserve's July meeting. Key benchmark indices in Singapore, Hong Kong and South Korea were down by 0.58% to 1.09%. Key benchmark indices in Japan, China and Indonesia rose by 0.01% to 1.25%. Taiwan's markets were closed amid a tropical storm.
Trading in US index futures indicated that the Dow could fall 20 points at the opening bell on Wednesday, 21 August 2013. US stocks on Tuesday, 20 August 2013, mostly climbed, with the S&P 500 halting its longest losing streak this year, as retailers including Best Buy Co. beat estimates and as Wall Street looked to clues about future US monetary policy. The Federal Open Market Committee (FOMC) later in the global day today, 21 August 2013, will issue minutes of its recent policy meeting held on 30 and 31 July 2013. The minutes of FOMC meet may help provide clues about the future of Fed's bond-buying program.
The US central bank currently buys $85 billion a month in US debt and mortgage-backed securities in a bid to hold interest rates low and encourage economic growth. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data. Fed's bond-buying program has kept global markets flush with liquidity in recent years.
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