Sensex falls nearly 300 points; rupee continues to stoke outflow fears

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex fell nearly 300 points on Tuesday to its lowest close in more than 1-1/2 months, as the rupee tumbled to a record low, continuing to hit lenders such as ICICI Bank on dashed rate cut hopes.

While suspected RBI intervention hauled the rupee off a record low struck on Tuesday afternoon, its continued weakness is seen clouding rate cut expectations, and stoking fears that foreign investors may pare positions, dealers said.

Foreign funds have been net sellers in debt over 13 successive sessions, selling over $2.7 billion, and the inflows into Indian stocks have become uneven over the last few sessions with heavy selling also seen in Index futures.

 

In addition to looking at the rupee movement, investors also focus in the near term on factory output and wholesale price data due later in the week for direction ahead of the central bank's review next week.

"FII selling and rupee weakening along with a cautious approach ahead of IIP and inflation numbers to be announced this week have led to profit-booking," said Nidhi Saraswat, senior research analyst at Bonanza Portfolio Limited.

The Sensex fell 1.53 percent, or 298.07 points, to end at 19,143, its lowest close since April 18.

The broader Nifty fell 1.52 percent, or 89.20 points, to end at 5,788.80, closing below its 200-day moving average of 5,791.46 for the first time since April 15.

The close below the 5800 support level indicates further weakness and consequent selling pressure in the coming sessions, Saraswat added.

Technical analysts see the next support for the Nifty at 5,765, or the 61.8 percent Fibonacci retracement of the move from 5,477 in April to 6,230 in May.

Lenders were hit hard by the rupee's fall. Striking 58.98 per dollar at its weakest, the rupee has dropped in 16 of the last 18 trading sessions and is down 8.3 percent since the start of May. The currency is among the top three worst-performing currencies in Asia this year.

ICICI Bank Ltd fell 3.7 percent, Axis Bank Ltd lost 2.4 percent and HDFC Bank Ltd ended 1.7 percent lower.

The three lenders were hit after the Reserve Bank of India imposed penalties on them on Monday for violating guidelines related to customer identity.

Jindal Steel and Power Ltd shares ended down 15.4 percent after the CBI registered a case on Tuesday against the company over coal mining rights.

A Jindal Steel spokesman said the company was "committed to fully cooperate" with the CBI police.

Reliance Communications Ltd fell 6.4 percent after Standard Chartered downgraded the stock to "underperform" from "in-line", saying current valuations "fully reflect the upside from the optic fibre and tower deals.

Oil and Natural Gas Corporation Ltd shares fell 4 percent after it withdrew a statement issued on Monday saying it and Oil India Ltd had signed an agreement to buy a 10 percent stake in a Mozambique gas field from Videocon Group for $2.48 billion.

ONGC did not give the reason for the withdrawal but a company source said the announcement of the deal had been accidentally issued prematurely.

Oil India ended 1.8 percent lower while Videocon Industries ended 0.4 percent higher.

Among other stocks that gained, Opto Circuits (India) Ltd rose 13.6 percent on value buying after it had fallen 34 percent in previous three sessions, dealers said.

(Editing by Jijo Jacob)