The Sensex on Monday crashed 448 points to an intra-day low of 18139.15, before recovering to end with a loss of 291 points, or 1.6%, at 18,308 as the rupee slumped to an all-time low of 63.30. With Rs. 1 lakh crore in investor wealth lost in a single day, experts are advocating a wait-and-watch policy.
The NSE’s 50-share Nifty also fell 93 points, or 1.7%, to 5,415, an 11-month low.
Sustained weakness in global markets and speculation over the US rolling back its economic stimulus package as early as next month worsened sentiments already hurt by warts in India’s economy.
Foreign insitutional investors (FIIs) sold shares of banks (down 3.4%) and auto makers (3.1%), sending the benchmark index down to a four-month low. The BSE metals index (up 1.8%) and IT (up 0.3%) were only exceptions.
Among the 30-Sensex stocks, 24 ended in the red, led by Bhart Airtel (down 5.5%) and ICICI Bank (down 5.1%).
As many as 263 stocks hit their respective one-year lows on the Bombay Stock Exchange.
Future Retail was the biggest loser (down 7.9%). JP Power (with a gain of 20%), Tata Steel ( up 5%) were among the few that bucked the trend.
“The markets have been driven by bond yields and the depreciation in the rupee,” said Rakesh Tarway, vice-president Motilal Oswal.
“Now high-priced Sensex and Nifty stocks will be targeted as mid-cap stocks have no room for correction,” said Kishor P Ostwal, chairman and MD, CNI Research.
So, caution should be the buzzword, said experts.
“The markets are in a free-fall, so till consolidation begins, we advocate a wait-and-watch policy,” said Pankaj Pandey, research head, ICICIDirect.com. “Don’t invest too much in stocks.”
However, if you are too keen to take the plunge, then go for defensive sectors such as pharma and information technology, advocate experts. Sun Pharma and Lupin have the potential to appreciate, added Pandey.
...while bond yields hit 5-year high
Mumbai: With the rupee hitting a record low of 63.30 against the US dollar on Monday, Indian benchmark 10-year government bond yield rose to 9.17%, the highest since August 21, 2008, in a sign that interest rates in India are expected to move higher.
Government 10-year bond yields indicate of trend in interest rates in the country.
“Short-term rates have gone up, there may be some transmission of long-term interest rates,” said Rupa Rege Nitsure, chief economist, Bank of Baroda.
The spurt in bond yields to 9% is expected to hurt the banking sector by R40,000-45,000 crore due to depreciation in bond portfolios according to bankers.
Union Bank of India chairman and managing director D Sarkar said he expects a market-to-market loss (MTM) will be around R40,000 crore for the banking industry in the July-September quarter.
MTM is valuing a financial asset at its market value and not the price at which it is bought.
“At this moment huge depreciation is coming in the bonds market and there will be impact on margins,” he said on the sidelines of a banking conclave organised by industy chamber FICCI.
Meanwhile, Indian government bonds will have no trading bands on Tuesday, the Fixed Income Money Markets and Derivatives Association has said.