Weak rupee, continued fall in oil prices too weigh
Indian stocks ended at a fresh 20-month low on Wednesday dropping to their weakest since 2014 before the election of Prime Minister Narendra Modi, while the rupee slumped to 2013 crisis levels on increasing concerns the country will be hit hard by the growing turmoil in global markets.
The falling stock prices reflect investor worries over slumping crude prices and volatility in China's markets that continue to trigger concerns about the health of the global economy.
The Sensex nosedived 417.8 points or 1.71 per cent to 24,062.04, to its lowest since May 16, 2014, a day when the poll results declared Prime Minister Narendra Modi's National Democratic Alliance victorious in a landslide national election.
The Sensex touched a high of 24,325.77 and a low of 23,839.76.
Similarly, the Nifty dropped 125.8 points or 1.59 per cent at 7,309.30, its lowest its lowest close since May 30, 2014.
The rupee dropped to as low as 68.16 per dollar, its weakest since September 4, 2013 and not far from a record low of 68.85 hit in August of the same year.
All BSE sectoral indices ended significantly in the red. Among them, realty index fell the most by 3.49 per cent, followed by metal 3.08 per cent, PSU 2.66 per cent and power 2.39 per cent.
Major Sensex losers were Adani Ports (-5.53%), State Bank of India (-5.13%), Reliance (-3.76%), Coal India (-3.45%) and Maruti (-3.4%), while the only three gainers were Bajaj Auto (+0.43%), Hero MotoCorp (+0.21%) and Wipro (+0.05%).
Brokers said sustained capital outflows due to a weak trend in global markets on renewed worries over slowing global economic growth and falling oil prices, dampened the trading sentiment here.
Selling pressure was so strong even record earnings of Reliance Industries failed to impress investors, they said.
Foreign investors have sold a net around $847 million worth debt and equities so far this month, a third straight month of outflows.
"I don't think there's too much pain ahead. A pullback is expected from these levels. I think too much bearishness has been factored in," said Ashtosh Raina, head of FX trading at HDFC Bank
"The FII outflows are not that big to warrant such a fall. And the RBI is there to stem the flow because they are well equipped to handle and won't let it go out of hand," Raina said.
Both the NSE and BSE indexes have fallen over 20 percent from their all-time highs in 2015.
Most blue chips, which have substantial foreign investor holdings, fell.
In its latest World Economic Outlook (WEO) update, the IMF said: "Advanced economies will see a modest recovery, while emerging market and developing economies face the new reality of slower growth.The WEO update now projects global growth at 3.4 per cent this year and 3.6 per cent in 2017, slightly lower than the forecast issued in October 2015. But these overall numbers fail to do full justice to the diversity of situations across countries. India and parts of emerging Asia are bright spots, projected to grow at a robust pace, whereas Latin America and the Caribbean will again see a contraction in 2016, reflecting the recession in Brazil and economic stress elsewhere in the region, even as most other countries in the region will continue to grow."
According to IMF projections, the Indian economy will grow at the rate of 7.5 per cent for both the calendar years - 2016 and 2017.
"A sharper-than-expected slowdown in China, a further appreciation of the dollar, a sudden bout of global risk aversion, besides an escalation of ongoing geopolitical tensions were the key risks to its outlook," the IMF added.
Meanwhile, foreign portfolio investors sold shares worth Rs. 857.70 crore yesterday, as per provisional data.
European stocks dropped on Wednesday as a relentless slide in oil prices hit world markets, with a leading regional European equity index falling to a 15-month low.
Asian markets dropped as sliding oil prices heightened investor concern that the global growth outlook is worsening. US stocks had finished mostly higher yesterday.