Markets witness highest single-day drop in 4 years

The Sensex dropped 769 points and the Nifty dropped 234 points, the highest single-day drop since July 2009

 

Benchmark shares indices Sensex and the Nifty witnessed the highest single day drop since July 2009 in absolute terms amid heavy selling by foreign institutional investors after RBI imposed fresh restrictions coupled with the weakening rupee which plunged to a new all-time low of Rs 62/$ in intra-day trade.

Further, talk of pruning of stimulus measures by the US Fed further dampended sentiment on worries that foreign inflows to emerging markets could take a hit.

The 30-share Sensex ended down 769 points at 18,598 the highest single day since July 2009 and the 50-share Nifty ended down 234 points or 4.1% at 5,508, its biggest single-day decline since July 2009.

The rupee has slipped to all time low in early trade amid weak equity markets and despite a slew of measures announced by the central bank on late evening Wednesday aimed at boosting inflows and curbing outflows. The rupee hit an all-time low of 62.03 to the dollar, breaching its previous record low of 61.80 hit on August 6. The rupee was trading at 61.75 to the dollar in late trades.

"US bond yields have spiked up significantly in past few days which will have a negative effect on India and other emerging markets. India, however, is in a difficult spot on account of widening current account deficit which is hampering rupee," said Vinay Khattar, Head of research & Vice President at Edelweiss Securities.

Risk appetite further dampened after government imposed new restrictions on foreign exchange outflows and gold imports on Wednesday in a new attempt to prop up the rupee, were also seen hampering an already slowing economy.

Asian markets witnssed sharp volatility on Friday, the yuan at an all-time high and Chinese stocks roiled by a likely trading error. Nikkei fell for a second day in thin trade on Friday as declines in insurers and banks weighed after another batch of upbeat U.S. data added to speculation that the U.S. Federal Reserve may begin to trim its stimulus soon. The Nikkei, Hang Seng, Shanghai Composite and Straits Times ended down 0.1-0.8% each.

European shares were trading flat as investors adopted a wait-and-watch policy as upbeat economic data from the US raised expectations that the US Fed may start reducing its stimulus measures sooner than expected. The FTSE was down 0.1%, CAC was up 0.1% and DAX slipped 0.2%.

The plunge in the markets were led by financials, capital goods and index heavyweights. Consumer Durables index was the top loser among sectoral indices on the BSE down 8.4% followed by Realty, Metal, Bankex, Capital Goods, Oil & Gas, FMCG, Auto and IT indices down 2-6% each.

Banking shares ended sharply lower on Friday after the Reserve Bank of India (RBI) on Wednesday announced additional measures to support the Indian rupee by stemming foreign exchange outflows by Indian residents. Markets were closed on Thursday on account of  Independence Day.

Overseas direct investment (ODI) by Indian companies has been cut three-fourths, 100% from 400%, making it more difficult for local corporates to buy overseas assets. RBI reduced the limit for remittances made by Resident Individuals, under the Liberalised Remittance Scheme (LRS Scheme), to $75,000 from $200,000 per financial year.

RBI data shows that even after dollar sales to the extent of $2.25 billion in June, the rupee weakened by almost 5% during the month. The sale made by RBI in June was the highest in almost one-and-a-half years.

In the financial segment, HDFC, HDFC Bank, ICICI Bank and SBI ended down 3.3-5.8% each.

Axis Bank lost 8% at Rs 1,055 after MSCI said it would exclude the stock from its standard and large cap indices with effect from 2 September, 2013.

Among the index heavyweights ITC, Reliance Industries and Infosys ended down 3-4.6% each.

Apart from bank shares, capital goods shares also witnessed a sell-off in today's trade on concerns that the economic slowdown would lead to drop in fresh order inflows and also hurt earnings going forward.

Analyst at Kotak Securities says the sharp contraction in revenues was mainly attributed to slow moving projects as well as depletion in order backlog. The market for power generation equipment would continue to remain subdued as fuel supply
issues, poor financials of SEBs and weak merchant power market remain major deterrents. Substantial industry overcapacity remains another negative, added analyst.
 
BHEL was the largest loser among capital goods segment which slumped 10.7% to end at Rs 106 ,its lowest level since October 2005, on BSE.

ONGC, Hindustan Unilever and TCS were among the other top losers in the Sensex.

Despite the market crash the real hero of the markets today was two-wheeler major Hero MotoCorp which ended up 2.4% at Rs 1,983. HMCL’s operating performance surprised positively as the EBITDA margin expanded 103bp quarter-on-quarter (qoq) to 14.9%. This was ahead of our expectations of 14.1% and was driven by a 10% qoq decline in other expenditure, which was on account of lower advertising expenditure and also due to the ongoing cost control efforts, says analyst at Angel Broking.

Among other shares, Godrej Properties has surged 4% to end at Rs 483, in otherwise extremely week market, ahead of its proposed Rs 700 crore rights issue. The Mumbai-based real estate developer has fixed August 20, as record date for the proposed rights issue of the company. The company would issue 8 shares for every 29 shares held by shareholders as on the record date. The issue price has been fixed at Rs 325 per share, which is almost 37% less than the current market rate.

Essar Oil ended locked in upper circuit for sixth day in a row, up 5% at Rs 60.35 after reporting operating profit of Rs 1,106 crore for the quarter ended June 30, 2013 (Q1), due to higher realization. The company had operational loss of Rs 178 crore in the same quarter year ago. Meanwhile, India's second largest private refiner has seen its net loss for the quarter come down to Rs 863 crore from Rs 1,518 crore in the like period a year ago.

In the broader market, the BSE Mid-cap index ended down 2.7% and the Small-cap index ended 2.1% lower.

Market breadth ended weak with 1,583 losers and 729 gainers on the BSE.