Sensex falls 286 points as rupee losses hurt sentiment

By Abhishek Vishnoi

MUMBAI (Reuters) - The Sensex fell over 1 percent on Wednesday, as a slump in the rupee reignited fears of foreign investor selling, while lenders declined after the Reserve Bank of India (RBI) mandated them to increase provisioning against their currency exposure.

The falls also tracked global shares as signs of slowing Chinese growth and escalating political tensions in Portugal, one of the euro zone's crisis hot-spots, spooked investors.

The Sensex has now erased its entire gain for the year and is down 1.28 percent, after hitting a 20,443.62 peak on May 20. The Nifty is down 2.27 percent.

The shares have been hit hard along with other emerging markets due to fears about an early end to U.S. monetary stimulus and signs of a weakening Chinese economy.

 

Foreign investors have sold nearly 98.2 billion rupees in domestic shares since the start of June, as per regulatory data.

Traders said U.S. non-farm payrolls data due this Friday and new earnings season that begins next week, with Infosys due to unveil its June-quarter results on June 12 were the near-term cues to watch.

"Rupee and global cues created concerns around flows and recovery but we will be buyers on select basis," said Dipen Shah, head of Private Client Group Research, Kotak Securities.

The Sensex fell 1.47 percent, or 286.06 points, to end at 19,177.76, falling for a second consecutive session.

The Nifty fell 1.48 percent, or 86.65 points, to end at 5,770.90, closing below the psychologically important 5,800 level.

Housing Development Finance Corp, where foreign investors hold almost three-fourth of the company, fell 2.5 percent on outflow worries, while Reliance Industries ended 2.4 percent lower.

NSE's banking index slumped 2.2 percent after the RBI issued draft guidelines that would require lenders to make higher provisions and increase risk weights on exposure to companies that have unhedged foreign-currency exposure.

State Bank of India fell 4.6 percent while Bank of Baroda ended 7.9 percent lower.

Punjab National Bank slumped 5.1 percent after Goldman Sachs downgraded the stock to "neutral" from "buy", citing a weak economic environment and the elevated stress asset levels at the lender.

Bajaj Auto Ltd slipped 1.2 percent as the strike continued at its Chakan plant in Maharashtra, causing a production loss of about 20,000 motorcycles for June.

However, among stocks that gained, Tata Global Beverages rose 1.1 percent after Morgan Stanley upgraded the stock to "overweight" from "equalweight", citing cheap valuation and a cyclical uptrend in its international business.

(Editing by Anand Basu)