BSE Sensex falls as rupee hits record low; earnings key

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex fell on Monday led by lenders such as ICICI Bank as the rupee's slump to a record low sparked fears of continued foreign outflows and cemented expectations the Reserve Bank of India would avoid cutting interest rates in July.

The rupee fell to an all-time low of 61.21 as an emerging markets sell-off on worries of an early end to U.S. stimulus laid bare the vulnerability of a country dependant on capital inflows to fund its record current account deficit.

Investors are now gearing up for a new earnings season that begins next week when Infosys Ltd unveils its June-quarter results on July 12, while also hoping for more government or central bank measures to boost foreign flows.

 

Earnings for the first quarter of the new fiscal year, which started in April, would help determine the outlook for shares and may help create a strong foundation for FY14 estimates, thereby supporting shares that have been hit hard by rupee volatility.

"While it seemed till the end of the previous week that market would gain some ground, the sharp rise in USD/INR has put brakes to bullish expectations," said Milan Bavish, head of research at Inventure Growth and Securities.

The benchmark BSE Sensex fell 0.88 percent, or 171.05 points, to end at 19,324.77.

The broader Nifty fell 0.96 percent, or 56.35 points, to end at 5,811.55, closing below its 200-day moving average.

Deutsche Bank reduced the BSE Sensex target to 21,000 from 22,500, citing faster-than-anticipated tapering down of U.S. monetary stimulus, India's high short-term external financing needs and fears over a China slowdown.

The rupee will be a key determinant for stock markets, Deutsche added.

Lenders slumped, Housing Development Finance Corp Ltd fell 3.1 percent while ICICI Bank Ltd slipped 2.2 percent as rate cut hopes in the July policy have virtually disappeared after the rupee rout.

Among other blue-chips, Reliance Industries Ltd fell 1.5 percent and Oil and Natural Gas Corporation Ltd ended 3.9 percent lower.

Tata Motors Ltd fell 2.8 percent on worries about production at unit Jaguar Land Rover's (JLR) plants from a threatened strike by DHL staff.

JLR and logistics firm DHL said on Monday that plans are in place to minimise the impact on production at the carmaker's British plants from a threatened strike.

Bharti Airtel Ltd shares fell 0.8 percent after Zambia begun criminal proceedings against all the three mobile phone operators in the country including Bharti, accusing them of failing to meet minimum standards, its spokeswoman said on Monday.

However among stocks that gained, Reliance Communications Ltd surged 7 percent after earlier hitting its highest intraday level since January 3, 2011, after the company said it would spin off its real estate business into a separately listed unit.

ITC Ltd rose 1.2 percent, marking its fourth day of gains, after the company raised the price of its Gold Flake Regular Filter cigarettes.

(Editing by Sunil Nair)