Equity and currency markets in India were in turmoil on Tuesday as fears over the impact on the global economy of falling oil prices and a crisis in the Russian currency market boiled over.
The benchmark 30-share S&P BSE Sensex plunged by 538.12 points or 1.97 per cent to close at 26,781.44 while the rupee fell to its lowest level in 13 months versus the dollar. The currency ended the day down by 59 paise to the dollar at Rs.63.53.
Metal stocks were the worst hit by 4.17 per cent followed by realty 3.80 per cent, FMCG 3.08 per cent and bank 2.91 per cent.
On the National Stock Exchange the 50-share nifty closed at 8,67.60 with a loss of 152 points.
“The carnage on the bourses was due to two factors — the fall in the rupee against the dollar which forced many foreign Exchange Traded Funds (ETFs) to offload their portfolios to prevent currency-related damages and secondly, the fall in crude oil prices which is also affecting some large FII ETFs and hedge funds.
These have led them to sell their investments in different asset classes to compensate for the collateral losses arising out of dropping crude oil prices” said Deven Choksey, Managing Director, K.R. Choksey Shares and Securities.
“This is an unnatural phenomenon and the speed at which the markets have fallen would make equity valuations attractive. This would help attracting long term investors to the market,” Mr. Choksey added.
Even though the consumer price index and the whole sale price index numbers for November were positive, an array of factors are weighing on the Indian rupee.
“The correction witnessed in domestic equities and anticipation of interest rate hike in the U.S. early 2015, in the wake of its strengthening economy, ahead of the upcoming FOMC meeting are fuelling the fall in the domestic unit,” said Sugandha Sachdeva, AVP and incharge - Metals, Energy and Currency Research, Religare Securities.
The rupee has been resilient, in spite of the rally witnessed in Dollar Index.
