Fed, weakening rupee spook Indian shares

Nifty slips under 6,000, Sensex closes below 20,000

Indian shares declined two per cent today as investors feared an end to the US stimulus programme and weak manufacturing data emanating from China would have adverse impact on the global market sentiments.

The CNX Nifty lost 127.45 points, or 2.09 per cent, to close decisively below the psychological 6,000 level, at 5,967.05, while BSE’s Sensex was down 388 points, or 1.93 per cent, to slip below the 20,000 mark, at 19,674.33. Today’s fall, in percentage terms, was the biggest for a day since May 8 last year.

Today’s slump in shares marked the fourth straight day of decline, erasing all the gains the benchmark indices had made in the first fortnight of the month. (SLIDE SHOW)

What really sent tremors across global markets were Federal Reserve Chairman Ben Bernanke’s comments suggesting bond purchases might be scaled back if the US economy improved. Asian markets witnessed massive profit booking as Japan’s Nikkei gave a blow to investors, cracking 1,143 points, or 7.3 per cent, today.

“With QE 1, 2 and 3, investors should not understand the party will be forever. Fed’s comments should not have come as a surprise. The weakening rupee also was an important factor. Though FIIs have pumped in close to $14 billion (or Rs 76,000 crore), which is not very different from last year (during the same period), markets have actually fallen in dollar terms,” said Dalton Capital Advisors Managing Director U R Bhat. According to him, investors should be cautious for some time.

Taking cues from Asian peers, Indian stocks remained weak in the initial trade. This only worsened as India’s largest lender, State Bank of India (SBI), announced poor quarterly numbers. Shares of SBI closed nearly eight per cent down, while those of Larsen & Toubro continued their steep free fall for a second straight day — the counter lost another six per cent in today’s trade.

Of the Nifty’s 50 stocks, only five could manage to close in the green in a falling market. Reliance Infra was the worst hit; the counter tanked over 10 per cent, while shares of Ranbaxy, SBI, Jaiprakash Associates and DLF lost between seven and nine per cent in today’s trade.

“A combination of factors impacted our markets in today’s trade. Fall in Japanese markets, along with a weakening rupee made foreign investors nervous. On top of it, poor quarterly numbers from SBI and Tata Steel put pressure on Indian stocks,” said Motilal Oswal Financial Services Chairman and Managing Director Motilal Oswal.

However, he added, it was a technical reaction and he was not worried about it. “Investors should use such declines and get in good quality stocks,” he said.

All sectoral indices closed in the red, with those of realty, capital goods and banks falling the most — between three and six per cent. According to the provisional data from the exchanges, FIIs continued to be net-buyers, pumping in Rs 316.23 crore, while DIIs were net-sellers of shares worth Rs 538.75 crore.