A falling rupee punched the benchmark BSE Sensex on Monday, pushing it down by 171 points, or 0.9%, to 19,325, after the currency breached the 61-level following stronger-than-expected US jobs data that fuelled concern that the Federal Reserve will slow the pace of its monetary stimulus later this year -- taking out cash from global markets.
The rupee’s slump sparked fears of continued foreign outflows and dimmed rate cut hopes by the Reserve Bank of India (RBI) in July as costlier foreign exchange will lead to price increases.
The broader Nifty of the NSE fell 56 points, or 0.9%, to 5,812.
“The decline in the markets seems to be a fallout of the rupee touching 61 levels (against the dollar) on Monday,” said Gautam Trivedi, MD and head, equities, Religare Capital.
Nine out of 13 sectoral indices closed in the red. Banking stocks were the worst hit with HDFC falling 3.1% and ICICI Bank dipping 2.2% on falling rate cut hopes.
IT companies, which earn almost 60% of its revenue from overseas operations, however, bucked the trend and the BSE
IT index closed with a gain of
4.4%. For these firms, the same dollar will now fetch more in rupee earnings.
Bucking the trend, Reliance Communications shares gained 7%, adding R2,012 crore in market value, after it announced plans to hive off its real estate assets into a separate company.
Investors are now gearing up for a new earnings season that begins next week when Infosys Ltd unveils its April-June quarter results on July 12, while also hoping for more government or RBI measures to boost foreign flows, said analysts. Global cues are also likely to affect sentiments, they added.
In a sign of declining optimism on Indian stocks, Deutsche Bank reduced its BSE Sensex target to 21,000 from 22,500, citing faster-than-anticipated tapering down of US monetary stimulus, India’s high short-term external financing needs and fears over a China slowdown. The rupee will be a key determinant for stock markets, it said.