Negative global cues, coupled with a slump in commodity prices and a weak rupee depressed the Indian equity markets during the late-afternoon trade session on Wednesday. This led to a barometer index receding by 616 points.
The selling frenzy led to both the bellwether indices of the Indian equity markets trading at levels which were last seen during May-June 2014.
Initially also, both the bellwether indices opened on a weak note in sync with their Asian peers and due to the flat closing of the US markets on Tuesday.
The selling pressure was accelerated by absence of any fresh positive trigger and below expected third quarter (Q3) results.
Furthermore, investors were seen cautious regarding the sliding value of rupee which touched a low of 68.16 to a US dollar -- its weakest level since September 2013 during the intra-day trade.
The rupee previously closed at 67.64-65 to a greenback.
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"Over the near term, unwinding pressure on US dollar shorts in the offshore markets and importer covering can keep the upward pressure on USD/INR," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.
"However, central bank can get aggressive in its intervention at current levels. As a result, a range of 67.50-68.50/70 can be seen over the near term."
The weakness in the rupee value indicates the massive foreign funds outflow from the Indian equity and debt markets.
The foreign institutional investors (FIIs) were net sellers in the equity markets on Tuesday. They divested Rs.857.70 crore.
Besides, long-liquidation positions and disappointing macro-data points for December which eroded investors' hopes for an interest rate cut during the upcoming monetary policy review of the apex bank dented sentiments.
Even crude oil's continuous decline in prices to a new 12-year low is expected to dent the US markets further, thereby impacting global sentiments.
The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) plunged by 616 points or 2.52 percent.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) was trading deep in the red. It was down by 187.10 points or 2.52 percent at 7,248 points.
The NSE Nifty touched a new 52-week low at 7,241.50 points.
The S&P BSE Sensex, which opened at 24,325.77 points, was trading at 23,863.68 points (2.45 p.m.) -- down 616.16 points or 2.52 percent from the previous day's close at 24,479.84 points.
During the intra-day trade, the Sensex touched a high of 24,325.77 points and a low of 23,839.76 points -- its new low in 52 weeks.
The S&P BSE market breadth favoured the bears -- with 2,265 declines and only 297 advances.
"Bearish Asian markets, plunge in the rupee value and and continuous weakness in oil prices has pulled down markets," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
"The general weakness that has plagued markets for the last fortnight has continued, in the absence of fresh positive triggers."
Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that markets continues to witness intense selling pressure after global cues turned negative on the back of further weakness in crude prices and the cut in growth forecasts by the IMF (International Monetary Fund).
"The IMF cut its global growth forecasts for the third time in the last one year on the back of sharp slowdown in China and weakness in commodity prices that are hurting markets like Brazil and Russia," Agarwal noted.
"We expect the selling pressure to continue as FIIs continue to pull out from emerging markets and earnings growth not picking up as expected."