Key benchmark indices trimmed losses after hitting fresh intraday low in mid-morning trade as the rupee pared losses after a steep intraday slide took it to record low below 68 against the dollar. The Sensex was down 250.68 points or 1.4%, up close to 270 points from the day's low and off about 130 points from the day's high. The market breadth, indicating the overall health of the market, was weak.
IT stocks gained on a weak rupee, with TCS and HCL Technologies hitting record high and Infosys scaling 52-week high. Airline stocks tumbled as crude oil prices surged. Bank stocks declined for the second straight day, with HDFC Bank hitting 52-week low.
The market dropped in early trade as stocks fell across the globe on fears of a possible US military stike in Syria. The market extended initial losses and hit fresh intraday low in morning trade. The market trimmed losses after hitting fresh intraday low in mid-morning trade. The S&P BSE Sensex trimmed losses after hitting its lowest level in almost a year. The 50-unit CNX Nifty also cut losses after hitting its lowest level in nearly 11 months.
The rupee pared losses after a steep slide took it to record low below 68 against the dollar. The partially convertible rupee was hovering at 67.90 against the dollar, sharply lower than its close of 66.24/25 on Tuesday, 27 August 2013. 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 rupee has fallen sharply this month due to concerns that India will find it tough to close its wide current-account gap when developed countries end their easy-money policies.
Investor sentiment has been hit adversely on concerns about government finances after the Lok Sabha on Monday, 26 August 2013, passed the Food Security Bill. The massive outlay of funds required for rolling out the programme is bound to raise the government's fiscal deficit.
The market sentiment was also affected adversely by data showing that foreign funds remained net sellers of Indian stocks on Tuesday, 27 August 2013. Foreign institutional investors (FIIs) sold shares worth a net Rs 1373.99 crore on Tuesday, 27 August 2013, as per provisional data from the stock exchanges.
The market is expected to remain volatile in the near future as traders roll over positions in the futures & options (F&O) segment from the near month August 2013 series to September 2013 series. The near month August 2013 derivatives contract expire tomorrow, 29 August 2013.
Stocks fell across the globe on geopolitical worries after media reports on Tuesday, 27 August 2013, said that the White House plans to publicly release evidence early as Thursday of how Syria's regime used chemical weapons against civilians. The Office of the Director of National Intelligence is assembling the report which is one of the final steps before the US commits to a military strike against Syrian government targets, media reports said. The UK, France and Turkey have all signaled they are willing to assist in a military strike, the report said.
At 11:20 IST, the S&P BSE Sensex was down 250.68 points or 1.4% to 17,717.40. The index tumbled 519.37 points at the day's low of 17,448.71 in mid-morning trade, its lowest level since 6 September 2012. The index declined 116.64 points at the day's high of 17,851.44 in opening trade.
The CNX Nifty was down 82.75 points or 1.75% to 5,194.70. The index hit a low of 5,118.85 in intraday trade, its lowest level since 5 October 2012. The index hit a high of 5,236.05 in intraday trade.
The market breadth, indicating the overall health of the market, was weak. On BSE, 1,306 shares fell and 437 shares rose. A total of 94 shares were unchanged.
Among the 30-share Sensex pack, 24 stocks fell and rest of them rose. ONGC (down 6.42%), HDFC (down 6.06%) and M&M (down 5.04%), edged lower.
Bank stocks declined for the second straight day. Among private sector banks, Axis Bank, Federal Bank, Yes Bank, Kotak Mahindra Bank and ICICI Bank shed 3.18% to 8.73%.
HDFC Bank declined 3.4% to Rs 541.85 after hitting a 52-week low of Rs 528 in intraday trade.
Among PSU bank stocks, State Bank of India, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank dropped 3.28% to 5.95%.
IT stocks gained on a weak rupee. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.
TCS rose 4.08% to Rs 1912 after hitting a record high of Rs 1942 in intraday trade.
Infosys rose 2.05% to Rs 3120.80 after hitting a 52-week high of Rs 3126.95 in intraday trade.
HCL Technologies rose 0.92% to Rs 957 after hitting a record high of Rs 967.90 in intraday trade
Wipro rose 2.17% ahead of the stock's inclusion in the National Stock Exchange's 50-share CNX Nifty index with effect from 27 September 2013. As part of periodic review, IT major Wipro will enter the National Stock Exchange's 50-share CNX Nifty index with effect from 27 September 2013 while Reliance Infrastructure would exit.
Earlier, Wipro was dropped from the CNX Nifty index from 1 April 2013 due to demerger of non-IT business into a separate company Wipro Enterprises.
Shares of Reliance Infrastructure lost 4.76%.
Airline stocks tumbled on higher crude oil prices. Jet Airways (down 7.46%), Kingfisher Airlines (down 4.79%), and SpiceJet (don 5.02%), edged lower. Aviation turbine fuel or jet fuel constitutes more than 50% of operating cost for airliners. Prices of jet fuel are directly linked to crude oil prices.
US crude oil futures extended Tuesday's steep gains on worries that a potential military strike against Syria could disrupt the region's oil supplies. US crude oil futures for October delivery jumped 2.73%, to $111.99 a barrel in electronic trading today, 28 August 2013. US crude oil futures for October delivery had surged 2.9%, to $109.01 a barrel on Tuesday.
Asian stocks dropped for a second day in a row on Wednesday, 28 August 2013, on concern the US will take military action against Syria. Key benchmark indices in Singapore, Hong Kong, Indonesia, China, South Korea and Japan fell by 0.17% to 2.81%. Taiwan's Taiwan Weighted rose 0.11%.
Trading in US index futures indicated that the Dow could gain 21 points at the opening bell on Wednesday, 28 August 2013. US stocks fell hard on Tuesday, with the Dow Jones Industrial Average ending at a two-month low, as unease over possible US action against Syria shook global markets.
Investors across the globe are eyeing the next policy meeting of the Federal Open Market Committee (FOMC) scheduled next month, with their focus squarely on the timing of tapering of Federal Reserve's bond purchases. The FOMC holds a two-day policy meeting on 17-18 September 2013 to decide on interest rates in the United States. 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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