Markets rattled by global risk aversion

Markets have slumped further on back of massive selling by overseas investors in the equity markets.

Global risk appetite was hampered after Federal Reserve Chairman Ben Bernanke hinted towards tapering off the bond-buying programme popularly known as ‘quantitative easing’ sooner-than-expected once US economy shows sustainable signs of recovery.

At 2:40PM, the 30-share Sensex dropped 503 points at 18,743 and the 50-share Nifty shed 161 point at 5,662 levels.

“We expect the economy to re-accelerate in Q4 after the fiscal landscape has cleared up. That should induce the Fed to slow down its asset purchases at the turn of the year and terminate QE3 altogether in 2014,” a note from Rabobank Financial Markets Research showed.

Meanwhile, the rupee weakened against the dollar in late trades on Thursday tracking weakness in the equity markets.

The currency rupee was trading at Rs 59.82 compared with previous close of Rs 58.72. It opened at Rs 59.70 and has already hit a low of Rs 59.94 so far.

The street is expecting the rupee to breach the Rs 60 per dollar mark today.

Asserting that Rupee is not in 'shambles', Finance Ministry today said the government, RBI and Sebi are alert to the situation and will take actions as warranted.

"We are not short of instruments ... We have a range of instruments to call on as and when needed, we will call upon them," Chief Economic Advisor Raghuram Rajan said when asked what steps the government is contemplating to check Rupee which slid to an all time low of 59.93 to a dollar today.

Globally, Asian stocks traded lower amid looming uncertainty over the Federal Reserve’s bond-buying plans.

The Nikkei dropped 1.6% to 13,029, Singapore Straits Times declined 2% to 3,148, Hong Kong’s Hang Seng declined 2.6% to 20,453 while China’s Shanghai Composite index was down 2% at 2,101.

Rate sensitive sectors were amongst the most hit on worries that the rising rupee would force the Reserve Bank of India to defer reduction in key policy rate going forward.

Realty index was the top loser among the sectoral indices on the BSE down 6% followed by Metal, Bankex, Capital Goods, Bankex, Power, PSU, Oil and Gas, Consumer Durables all down over 3% each.

In the financial segment, ICICI Bank was down 4% while HDFC, HDFC Bank and SBI were down over 2-5%.

Among the index heavyweights ITC and Reliance Industries were both down over 3%.

Neyveli Lignite Corporation is trading lower by 3% at Rs 58.20 on reports that the government is planning to offload 5% of its stake in the company through offer-for-sale.

The market breadth in BSE remains dismal with 1,615 shares declining and 579 shares advancing