Intraday recovery proved short lived as key benchmark indices weakened once again in mid-afternoon trade. The S&P BSE Sensex was down 196.97 points or 1.01%, off about 120 points from the day's high and up close to 115 points from the day's low. The market breadth, indicating the overall health of the market, was negative. Metal stocks declined. Bank stocks also edged lower. ONGC extended intraday losses. Index heavyweight and Cigarette market ITC reversed intraday losses.
Investor sentiment was affected adversely as the rupee hit record low below 61 a dollar as stronger than expected US job data fuelled expectations the US Federal Reserve will slow the pace of monetary stimulus later this year. The Fed's bond-buying program which has flooded global markets with liquidity has helped support an array of assets, including equities in recent years.
The market edged lower in early trade as Asian stocks fell after stronger than expected US job data fuelled expectations the US Federal Reserve will slow the pace of monetary stimulus later this year. Weakness continued in morning trade. The Sensex continued to hover in negative terrain in mid-morning trade. The market trimmed intraday losses in early afternoon trade. Key benchmark indices pared intraday losses in afternoon trade after European market opened higher. The market once again weakened in mid-afternoon trade.
The Indian rupee sank to a record low against the US dollar on Monday, 8 July 2013, mirroring losses in most emerging market currencies after strong US employment data raised fears that the US Federal Reserve would roll back its monetary stimulus. The rupee was trading at 61.03 versus dollar, compared with Friday's close of 60.225/235.
Indian government bonds also came under selling pressure on fears that foreign investors would continue to pull out of Indian debt to chase higher bond yields in the US. The yield on the most traded 8.2% GS 2025 was at 7.7366%, higher that its close at 7.6731% on Friday, 5 July 2013. Bond prices and yields move in opposite directions. The Fixed Income Money Market and Derivatives Association of India, which along with the RBI oversees bond markets, said on its website that it had removed price filters on bonds for Monday's session.
At 14:20 IST, the S&P BSE Sensex was down 196.97 points or 1.01% to 19,298.85. The index declined 309.90 points at the day's low of 19,185.92 in early trade, its lowest level since 3 July 2013. The index fell 73.13 points at the day's high of 19,422.69 in early trade.
The CNX Nifty was down 63.65 points or 1.08% to 5,804.25. The index hit a low of 5,775.55 in intraday trade, its lowest level since 3 July 2013. The index hit a high of 5,833.85 in intraday trade.
The market breadth, indicating the overall health of the market, was negative. On BSE, 1,246 shares fell and 877 shares rose. A total of 101 shares were unchanged.
From the 30-share Sensex pack, 24 stocks fell and rest of them rose. HDFC (down 3.16%), NTPC (down 2.96%) and Tata Motors (down 2.7%), edged lower.
Index heavyweight and Cigarette market ITC rose 0.29%, with the stock reversing intraday losses.
ONGC fell 3.5%, with the stock extending intraday losses.
Metal stocks declined. Hindalco Industries (down 0.6%), Jindal Steel & Power (down 0.94%) Tata Steel (down 1.72%), and Sterlite Industries (India) (down 1.19%), edged lower.
Bank stocks also edged lower. HDFC Bank (down 0.77%), Kotak Mahindra Bank (down 1.51%), and ICICI Bank (down 2.54%) declined.
Among PSU bank stocks, State Bank of India, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank shed by 0.63% to 1.3%.
The Reserve Bank of India (RBI) on 2 July 2013, issued draft guidelines that would require banks to make higher provisions and increase risk weights on exposure to companies that have unhedged foreign-currency exposure. Starting 1 October 2013, banks will have to monitor unhedged foreign currency exposure of borrowers at monthly intervals.
The draft guidelines advised banks to ensure that their policies and procedures for management of credit risk factor their exposure to currency-induced credit risks and are calibrated towards borrowers whose capacity to repay is sensitive to changes in the exchange rate and other market variables.
Prime Minister Dr. Manmohan Singh will meet the captains of Indian industry on 29 July 2013 to review steps to revive the economy, a statement from the prime minister's office (PMO) said. The discussion will cover measures to correct the Current Account Deficit, measures to revive industrial growth, depreciation of the rupee and its impact on trade and industry, skill development and ways of accelerating it and development of the Delhi-Mumbai Industrial Corridor (DMIC), the Chennai-Bangalore Industrial Corridor (CBIC), and the Amritsar-Delhi-Kolkata Industrial Corridor (ADKIC).
European markets edged higher on Monday, 8 July 2013, as investors waited for Alcoa Inc. to kick off the US earnings season later in the global day. Key benchmark indices in UK, France and Germany were up 0.93% to 1.42%.
Asian stocks dropped on Monday, 8 July 2013, after a better-than-forecast monthly US jobs report fueled speculation that the Federal Reserve may begin reducing stimulus this year. Key benchmark indices in China, Hong Kong, Indonesia, Singapore, Japan, South Korea and Taiwan shed by 0.31% to 3.32%.
Chinese stocks were also hit by concerns that Beijing won't ease policies despite slowing growth. In a statement issued on Friday, 5 July 2013, elaborating on its pursuit of economic restructuring and reforms, the State Council -- China's cabinet -- indicated it would strengthen supervision of wealth-management products and emphasized financial-market stability, but it also hinted it would loosen controls on banks' interest rates only gradually. The State Council also suggested tighter controls over credit to industries with excess production capacity.
Trading in US index futures indicated that the Dow could gain 30 points at opening bell on Monday, 8 July 2013. US stocks surged on Friday, 5 July 2013, after government data showed the nation added more jobs than forecast last month. The non-farm payrolls increased by 195,000 in June and the unemployment rate held steady at 7.6% as more people entered the workforce. Job growth in previous months also was revised higher.
Federal Reserve Chairman Ben Bernanke on 19 June 2013 said that the central bank may taper the pace of its bond purchases, currently set at $85 billion a month, as early as this year if the economy continues to improve in line with its forecasts.
The minutes of Federal Open Market Committee's (FOMC) policy meeting held on 19 June 2013, will be released on Wednesday, 10 July 2013. The minutes may provide more insight into the Fed's outlook on monetary stimulus. Bernanke is also due to deliver a speech on that day.
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