A sharp setback in rupee which hit record low against the dollar and a surge in bond yields spooked investors as key equity benchmark indices extended Friday's (16 August 2013) steep losses. The S&P BSE Sensex was provisionally down 320.19 points or 1.72%, off close to 310 points from the day's high and up about 140 points from the day's low. The market breadth, indicating the overall health of the market, was weak. Pharma stocks edged lower. Shares of two wheeler makers dropped. Bank stocks declined across the board, with ICICI Bank, State Bank of India, HDFC Bank and Bank of Baroda hitting 52-week low.
A bout of volatility was witnessed as key benchmark indices trimmed losses after a weak opening. Weakness continued on the bourses in early afternoon trade. Key benchmark extended losses in afternoon trade. Weakness continued on the bourses in mid-afternoon trade. The market trimmed losses in late trade.
The market sentiment was affected adversely by data showing that foreign funds were net sellers of Indian stocks on Friday, 16 August 2013. Foreign institutional investors (FIIs) sold shares worth a net Rs 563.23 crore on Friday, 16 August 2013, as per provisional data from the stock exchanges.
The rupee slumped against the dollar on a spike in US Treasury yields on increasing concerns the Federal Reserve will begin to taper its $85-billion-a-month asset purchases in September. The partially convertible rupee was hovering at 62.75, sharply lower than its close of 61.65/66 on Friday, 16 August 2013.
Rupee depreciation fuels inflation, increases import bill and current account deficit and hurts economic growth.
Bond prices declined. The yield on the benchmark federal paper 7.16 GS 2023 was hovering at 9.1572%, sharply higher that its close of 8.8836% on Friday, 16 August 2013. Bond yield and bond prices are inversely related.
As per provisional figures, the S&P BSE Sensex was down 320.19 points or 1.72% to 18,277.99. The index lost 459.03 points at the day's low of 18,139.15 in mid-afternoon trade, its lowest level since 13 September 2012. The index fell 10.80 points at the day's high of 18,587.38 in opening trade.
The CNX Nifty was down 104.85 points or 1.9% to 5,403, as per provisional figures. The index hit a low of 5,360.65 in intraday trade, its lowest level since 5 October 2012. The index hit a high of 5,499.65 in intraday trade.
The total turnover on BSE amounted to Rs 1839 crore, lower than Rs 2132.35 on Friday, 16 August 2013.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,391 shares declined and 898 shares rose. A total of 140 shares were unchanged.
Among the 30-share Sensex pack, 24 stocks declined and rest of them gained. Tata Motors (down 3.64%) and M&M (down 3.43%), and ONGC (down 2.91%), edged lower.
Steel major Tata Steel jumped 5.27%. The stock was the top gainer from the Sensex pack.
Bank stocks declined. ICICI Bank declined 5.25% to Rs 813.50 after hitting a 52-week low of Rs 810.55 in intraday trade today, 19 August 2013. The bank on Friday, 16 August 2013, reportedly raised interest rates on fixed deposit by 0.25%-0.75% mainly on short term deposits. Deposit rate in the 46 days to 60 days tenure has been hiked by 0.75% to 7%, while in the 61 days to 289 days by 0.75% to 7.75%. One year to 389 day deposit has been hiked by 0.50% to 8%. Five year deposit has been hiked by 0.25% to 8.5%. The bank however kept its benchmark lending rate or base rate unchanged at 9.75%, reports added.
HDFC Bank dropped 1.61% to Rs 580 after hitting a 52-week low of Rs 570.10 in intraday trade today, 19 August 2013.
Axis Bank slumped 7.26% to Rs 979.80, with the stock extending Friday's sharp slide triggered by an announcement from MSCI that it would exclude the banking stock from its standard and large cap indices with effect from 2 September 2013. The stock had lost 8.23% to Rs 1,055.40 on Friday, 16 August 2013.
Shares of Axis Bank have also came under pressure after the Reserve Bank of India (RBI) on Wednesday, 14 August 2013, said that overseas investors will not be allowed to purchase additional shares of the bank given the foreign shareholding limit of 49% in the stock has been breached.
State Bank of India (SBI) declined 2.56% to Rs 1530.90 after hitting a 52-week low of Rs 1521.20 in intraday trade today, 19 August 2013.
Bank of Baroda lost 5.03% to Rs 455 after hitting a 52-week low of Rs 439 in intraday trade today, 19 August 2013.
Among other PSU bank stocks, Canara Bank, Union Bank of India, Bank of India, and Punjab National Bank shed by 3.65% to 6.36%.
Shares of two wheeler makers dropped. Bajaj Auto slipped 4.08%. Bajaj Auto on 13 August 2013 said that the company has received a notice from the workmen's union viz. Vishwa Kalyan Kamgar Sanghatana stating that the stoppage of work at Chakan plant has been withdrawn and all the workmen at Chakan plant will resume their duty in their respective shifts from 14 August 2013. The company had earlier informed on 25 June 2013, that it had received a notice from the workmen's union of its Chakan plant viz., Vishwa Kalyan Kamgar Sanghatana stating that they propose to call for a stoppage of work by all the workmen employed in Chakan plant from the morning shift of 28 June 2013. The workmen at Chakan Plant had however, stopped coming from 25 June 2013 itself, without assigning any reason.
Hero MotoCorp skidded 2.92% to Rs 1925, off the day's low of Rs 1857.
Pharma stocks edged lower. Dr Reddy's Laboratories (down 1.01%), Cipla (down 3.36%), and Sun Pharmaceutical Industries (down 4.05%), declined.
Telecom major Bharti Airtel shed 5.51% to Rs 317.35, off the day's low of Rs 307.70.
Jaiprakash Power Ventures surged 20.25%.
Prime Minister Manmohan Singh on Saturday, 17 August 2013, told a news agency that India wasn't headed for a crisis despite its large current-account deficit and said the country has plenty of foreign-exchange reserves. There is no comparison and no question of going back to the situation India faced in 1991, when the country was on the brink of defaulting on its debts, Mr. Singh was quoted as saying by the agency. This time, he said, India has enough reserves to pay for as many as seven months of imports.
India's economic problems, including a wide current account deficit that has pushed the rupee to record lows, cannot be compared to the country's 1991 balance-of-payments crisis, the World Bank's chief economist Kaushik Basu said on Monday, 19 August 2013. Basu cited a raft of economic data to show that the current situation was healthier than that of 1991, describing such comparisons as a "non question."
In an attempt to assuage concerns that India was moving toward capital controls, economic-affairs secretary Arvind Mayaram told reporters on Friday, 16 August 2013, that India doesn't plan to impose controls on money being repatriated by companies, such as dividends and royalties. His comments came after the Reserve Bank of India (RBI) on Wednesday, 14 August 2013, reduced the amount of money that Indian residents and companies can send abroad in an attempt to stem rupee's slide.
European stock markets edged lower on Monday, 19 August 2013, as rise in US Treasury yields spooked investors. Key benchmark indices in UK, France and Germany were down 0.18% to 0.62%.
Asian stock fell for a third straight day on Monday, 19 August 2013, as worries about the Federal Reserve's policy outlook and rising US Treasury yields weighed on sentiment. Key benchmark indices in Indonesia, Singapore, Hong Kong, South Korea, and Taiwan were down by 0.13% to 5.58%. Key benchmark indices in China and Japan rose by 0.79% to 0.83%.
Japan's exports jumped by the most since 2010 in July, aiding Prime Minister Shinzo Abe's efforts to drive an economic recovery even as rising energy costs boosted the trade deficit. Exports increased 12.2% from a year earlier after a 7.4% rise in June, the Ministry of Finance said in Tokyo today. Imports climbed 19.6%, leaving a trade deficit of 1.02 trillion yen ($10.5 billion), the third biggest on record in data back to 1979. The seasonally-adjusted deficit widened from June to 944 billion yen.
Thailand cut its 2013 growth forecast as the country entered recession for the first time since the global financial crisis, with rising household debt limiting central bank scope to support the economy. Gross domestic product unexpectedly shrank 0.3% in the three months through June from the previous quarter, when it contracted a revised 1.7%, the National Economic and Social Development Board said in Bangkok today.
Trading in US index futures indicated a flat opening of US stocks on Monday, 19 August 2013. US stocks declined on Friday, 16 August 2013, handing the Dow Jones Industrial Average its worst week this year, with investors on uncertain footing as longer-term Treasury yields rose to two-year highs. On US economic data front, the Commerce Department reported housing starts climbed at an annual rate of 896,000, less than the 915,000 estimated. The Labor Department reported productivity rose at a slightly better-than-estimated 0.9% annual rate in the second quarter.
The Federal Open Market Committee (FOMC) on Wednesday, 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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