Volatility continued as key benchmark indices once again slipped into the red in mid-morning trade as rupee further weakened to hit fresh record low below the 65 mark against the dollar. The S&P BSE Sensex was down 73.97 points or 0.41%, off close to 175 points from the day's high and up about 70 points from the day's low. The market breadth, indicating the overall health of the market, turned negative from positive. PSU OMCs rose as US crude-oil futures extended recent losses. Index heavyweight and cigarette maker ITC reversed intraday losses. Bank stocks declined.
High volatility was witnessed as key benchmark indices edged lower after swinging wildly between the positive and negative terrain in early trade. Volatility continued as key benchmark indices regained positive terrain in morning trade. Key benchmark indices once again slipped into the red in mid-morning trade as rupee further weakened to hit fresh record low below the 65 mark against the dollar.
The rupee hit record low below 65 against the dollar after minutes of the Federal Reserve's last meeting signaled the US central bank was on course to pare bond purchases this year. The rupee was hovering at 65.35, sharply lower than its close of 64.11/12 on Wednesday, 20 August 2013.
The rupee has slumped in the past few days on worries that India would struggle to fund its current-account deficit when the US central bank pulls back stimulus to the US economy.
Rupee depreciation fuels inflation, increases import bill and current account deficit. It also increases the government's spending on fuel subsidies, potentially widening the fiscal deficit.
The market sentiment was hit adversely after data showed that foreign institutional investors (FIIs) remained net sellers of Indian stocks on Wednesday, 21 August 2013. FIIs sold shares worth a net Rs 792.11 crore on Wednesday, 21 August 2013, as per provisional data from the stock exchanges.
At 11:20 IST, the S&P BSE Sensex was down 73.97 points or 0.41% to 17,831.94. The index jumped 101.36 points at the day's high of 18,007.27 in morning trade. The index fell 146.32 points at the day's low of 17,759.59 in early trade, its lowest level since 11 September 2012.
The CNX Nifty was down 17.95 points or 0.34% to 5,284.60. The index hit a high of 5,333.20 in intraday trade. The index hit a low of 5,254.05 in intraday trade, its lowest level since 5 October 2012.
The market breadth, indicating the overall health of the market, turned negative from positive in mid-morning trade. On BSE, 1,018 shares fell and 713 shares rose. A total of 112 shares were unchanged.
Among the 30-share Sensex pack, 16 stocks rose and rest of them fell. Maruti Suzuki India (down 3.3%), NTPC (down 2.46%) and M&M (down 1.77%), edged lower.
Bank stocks declined. Yes Bank (down 6.36%), HDFC Bank (down 1.97%) and ICICI Bank (down 1.29%), and State Bank of India (down 0.47%), edged lower.
Most bank stocks had rises on Wednesday, 21 August 2013, after the Reserve Bank of India (RBI) on Tuesday, 20 August 2013, relaxed some rules that will help banks deal with the notional or marked-to-market (MTM) loss in their government bond portfolios due to a recent sharp fall in bond prices. The RBI on Tuesday, 20 August 2013, said it would repurchase government bonds to increase the availability of cash in the banking system, a step that appears to be a partial reversal of the slew of measures it took since mid-July to tighten liquidity. In a late evening news release, the RBI said it would buy back Rs 8000-crore of government bonds on Friday, 23 August 2013. Further repurchase will depend on evolving market conditions, it said. It is important to ensure that the liquidity tightening doesn't harden long-term bond yields and impact the flow of credit to productive sectors of the economy, the central bank said, referring to its buyback plan.
The RBI on Tuesday also relaxed some rules that will help banks deal with the notional or marked-to-market (MTM) loss in their government bond portfolios due to a recent sharp fall in bond prices. They now don't have to record their current marked-to-market losses immediately as the RBI has allowed them to spread the losses equally over the remaining period of this fiscal year.
PSU OMCs rose as US crude-oil futures extended recent losses. BPCL (up 2.66%) and HPCL (up 2.07%), edged higher.
US crude-oil futures fell for the fourth day in a row after the minutes from the Federal Reserve's latest policy meeting heightened concerns that less economic stimulus could hit demand for the fuel. US crude-oil futures for October delivery fell 5 cents to $103.80 a barrel in electronic trading today, 22 August 2013.
In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals while completely deregulating diesel prices sold to institutional or bulk buyers. The government has already freed pricing of petrol.
Indian Oil Corporation fell 1.02% on turning ex-dividend today, 22 August 2013, for dividend of Rs 6.20 per share for the financial year ended March 2013.
Index heavyweight and cigarette maker ITC rose 0.28% to Rs 301.35. The stock revered direction after dropping as much as 3.33% to Rs 290.20 in intraday trade.
JBF Industries jumped 8.32% to Rs 92.45 after the company's board of directors on Wednesday, 21 August 2013, approved a proposal to buyback the company's own shares from the existing equity shareholders of the company other than promoters and the persons who are in control of the company. The company has set aside Rs 73.50 crore for share buyback. The buyback will be carried out through open market purchases. The maximum price at which the company will buyback its own shares is set at Rs 105.
Asian stocks dropped on Thursday, 22 August 2013, after minutes of the Federal Reserve's last meeting signaled the US central bank was on course to pare bond purchases this year. Key benchmark indices in China, Singapore, Hong Kong, Japan, Taiwan, Indonesia and South Korea were down by 0.13% to 2.28%.
A report showed China's manufacturing unexpectedly expanded this month. A Chinese manufacturing index rose in August from the lowest level in 11 months, adding to signs the world's second-biggest economy is strengthening after a two-quarter slowdown. The preliminary reading of 50.1 for a Purchasing Managers' Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 47.7 in July.
Trading in US index futures indicated that the Dow could fall 28 points at the opening bell on Thursday, 22 August 2013. US stocks dropped on Wednesday, 21 August 2013, as investors weighed the Federal Reserve's signaling that it remained on course to curb its monthly bond purchases by the end of the year.
Federal Reserve policy makers were broadly comfortable with Chairman Ben S. Bernanke's plan to start reducing bond buying later this year if the economy improves, with a few saying tapering might be needed soon, minutes of their last meeting showed on Wednesday. Almost all committee members agreed that a change in the purchase program was not yet appropriate, and a few said it might soon be time to slow somewhat the pace of purchases as outlined in that plan, according to the record of the Federal Open Market Committee's July 30-31 gathering released Wednesday in Washington. A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases, the minutes show. Almost all participants confirmed that they were broadly comfortable with the committee moderating the pace of its securities purchases later this year.
The US central bank currently buys $85 billion a month in US debt and mortgage-backed securities in a bid to hold interest rates low and encourage economic growth. Federal Reserve Chairman Ben Bernanke has on several occasions stressed that the tapering process is dependent on an improvement in data. Fed's bond-buying program has kept global markets flush with liquidity in recent years.
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