Money Aug 23, 2013
3. 30 pm: Sensex closes in green, rupee recovers
The Indian markets closed in the green today even as the rupee hovered near 65. The BSE sensex closed at18517.90, up 1.12 percent, while the Nifty closed at5471.75, up 1.17 percent.
"We lower our weighting in India from overweight to neutral. In our view, India will continue to struggle with the trade-off between defending a currency and supporting growth," HSBC said in a research note today.
CRISILexpects the rupee to recover from its current level and end fiscal 2013-14 at 60 per dollar.The rating agency says that the strengthening of rupee by March 2014 will be driven by two factors.
"First, we now expect the current account deficit (CAD) to fall to 3.9 per cent of GDP in 2013-14 compared with 4.8 per cent last year. CAD is expected to correct significantly in the second half of the year due to a decline in non-oil imports, including gold. Second, foreign capital inflows are expected to pick up in the second half of the year when the steps announced by the government to attract USD 11 billion in capital inflows (via foreign borrowings by state-owned financial institutions and public sector oil companies and measures to attract non-resident deposits) begin to materialize," CRISIL explained.
Stocks in news:
Ranbaxy Laboratories closed o.08 percent down after thegovernment today said it has ordered the Drug Controller General of India (DCGI) to check the quality of drugs produced byRanbaxy and to ensure that the firm is following standard manufacturing norms at its various manufacturing plants.
Reliance Infrastructureshares surged 4 percent as the Maharashtra Electricity Regulatory Commission (MERC) allowed the company to recover Rs 925 crore arrears per year.
RIL stocks soared 1. 64 percent after the company announced it has discovered a new gas condensate off the east coast in the Cauvery basin along with itsUK-based partner British Petroleum.
12. 25 pm:Nifty holds at 5400 amid volatility
The market is marginally in the green amid volatility in noon trade as it is consolidating at current levels sharp ups and downs seen from last Friday.
The BSE Sensex is at 18406.30, up 0.51 percent while the Nifty is at 5436.85, up 0.53 percent.
Sun Pharmaceutical Industries Ltd is up 1 percent after a competitor raised its revenue guidance, citing strong sale of a generic antibiotic also sold by Sun Pharma, reported Reuters.
Hikma Pharmaceuticals Plc on Wednesday raised its full-year revenue forecast for the third time in four months, riding on strong sales of generic antibiotic doxycycline, a drug used to prevent and treat malaria and other infections.
Analysts expect generic doxycycline to contribute around US$60-80 million in sales in FY14 for Sun Pharma.
The Indian rupee remained volatile from early trade, trading around 64.55 against the US dollar.
The underlying pressure on the rupee is not over yet, believes Mitul Kotecha, global head of currency strategy, Credit Agricole. Kotecha adds that theIndian currency is merely taking a breatherafter the sharp volatility seen in the past few days.Speaking to CNBC-TV18, Kotecha adds that the rupee will take a long time to regains its lost strength.
11. 45 am:Sensex and Nifty gain; FIIs selling weighs
Paring early losses, the BSE benchmark Sensex today recovered by 56 points in late morning trade on fresh buying in consumer durable, capital goods, auto, realty and banking counters on firm Asian cues.
The market sentiment was also boosted after Finance Minister P Chidambaram said yesterday that revival and encouragement of growth will continue to be the focus of the government.
At 11. 45 am, the BSE Sensex is at 18371.54, up 0.32 percent while the Nifty is at5427.25, up 0.35 percent.
Meanwhile, foreign institutional investors (FIIs) sold shares worth a net Rs 1,277.64 crores yesterday, as per provisional data from the stock exchanges.
The Indian rupee is nearing the 65 zone once again. At 11.45 am, the rupee was trading at 64.80.
10. 45 am: Markets recover, RIL surges
The markets have recovered a bit. The BSE Sensex is at 18378.94, up 0.36 percent, while the Nifty is at 5
9.33 am: Rupee turns choppy again, Sensex falls
The Indian markets opened in the green but soon moved to red even as the rupee recovered in the morning trade.
The BSE Sensex opened up 73 points while the Nifty advanced 23 points. However, at 9.40 am, the BSE Sensex is at 18275.01, down 0.21 percent while the Nifty opened at 5397.55, down 0.20 percent.
The Indian rupee opened higher today, a day after Finance Minister P Chidambaram said there was no need for unwarranted pessimism and the rupee was "undervalued". However, the currency slipped into the red as the finance minister did not announce any new measure to shore up the currency.
The partially convertible currency opened higher at 64.31 against Thursday's close of 64.55. However, it traded at 64.60, down 5 paise from yesterday's close.
The rupee had hit a record low of 65.56 yesterday.
BSE healthcare, FMCG indices are the top sectoral losers -- Ranbaxy falls 3.5 pct, Ruchi Soya down 5.7 pct
Metal stocks cotinues to do well in trade -- Jindal Steel gains 3.4 pct, Jindal Saw up 2 pct, Bhushan Steel gains 1.4 pct, Tata Steel gains 1 pct, Hindalco rises 0.9 pct.
Foreign funds continue to be sellers in equities, having sold for five successive sessions
As of 9:25 a.m., the rupee is trading at 64.56 versus the dollar, largely unchanged from yesterday's close
Reliance, BP make new gas discovery off India's east coast
Meanwhile, RBI's annual report said a recovery is possible by the end of the year on the back of better agricultural growth. It said household financial savings are up and investment in gold is down. It added that expects current account deficit to come down from the second quarter.
Ratings agency Fitch has dispelled some fears that India may be staring at a ratings downgrade. It has maintained its stable outlook for India's triple-B-minus rating.
In the global front, US markets rebounded to close higher on Thursday and Europe too clocked in gains on the back of upbeat PMI data. Indian indices reversed all the previous day's losses with the Sensex gaining more than 400 points while the Nifty gained 105.90 points to shut at 5408.45.
Asian markets were trading positive in morning with Japan up over 2 percent.
End of updates for 22 August, Thursday
17:26: Finance Minister P Chidambaram, today attempted to shore up the economy and markets and said that rupee at the current level is undervalued and should find its own level once the capital flows pour in.
"Rupee has overshot it's reasonable level. There is unwanted panic in currency market," he said at a press conference this evening. He added that he will not put a value on the undervalued rupee but was confident that the rupee will stabilise as foreign direct investment in the first quarter of the current fiscal have risen 70 percent to $94.1 billion against the last quarter.
He reiterated that the RBI's measures unveiled last week were only meant to stabilise the foreign exchange market and that the government has no intentions to resort to capital controls.
Chidambaram said there is widespread concern over volatility in rupee. However, there is volatility in all emerging market currencies due to global factors.
However, he said, "we have taken many measures to revive investment and growth and they were committed to reduce fiscal deficit, and Current Account Deficit will be met".
He also maintained that growth would remain flat in the first quarter of current fiscal but will pick up in the second and third quarter.
3. 30 pm: Markets close in green even as rupee remains near 65
The Indian markets gained much in the afternoon trade even as the Indian rupee remained at 64. 93.
The BSE Sensex closed at18300.91, up 395 points while the Nifty closed at 5409.20, up 106.65 points.
Jim Walker of Asianomics said thatIndia needs a sensible, responsible fiscal policy. "Schemes such as the Food Security Bill, National Rural Employment Guarantee Scheme, or NREGS, should be taken off the table, especially at a time when the economy is slowing down," Walker told CNBC-TV18 in an interview.
Reliance Communications is 5.67 percent even asADAG ChairmanAnilAmbani today appeared as a prosecution witness before a Delhi court trying the 2G spectrum case. Ambani said he does not "recall" the various board meetings of a company, said to be an associate of RADAG, as the minutes were "not prepared" by him.
Ranbaxy Laboratories is up almost 16 percent. Sesa Goashares today soared by nearly 8.6 percent on inclusion in the 30-share benchmark S&P BSE Sensex from August 27.
2:35 pmReserve Bank of India has reasons to cheer, well almost. The recent spike in US bonds yields will benefit the Indian central bank with more dollars. Thanks to the hardening yields in the US, a rough calculations done by Economic Times showsthat the Reserve Bank of India (RBI) can earn as much as $2 billion in extra returns if the spike in the US bond yields continues.
With the ten-year US bond yields which have risen to 2.88% currently, RBI stands to earn a mouth watering income on its $251 billion parked in securities. And with current rupee depreciation, the earnings could be even higher. In fact, as per RBI data, the total interest income earned increased 8.9 percent to $1.84 billion against $1.69 billion in the quarter before. ( Read the full report here)
RBI's 'Operation Twist' causes collateral damange, fails to save rupee
2:21 pm The rupee fell as much as 2.2 percent to 65.56, heading for a sixth straight session of declines, and is down 16 percent so far this year despite efforts by policymakers to prop it up.
Currencies in Indonesia, Malaysia and Thailand all hit multi-year lows on Thursday on concerns that the Fed's scaling back of stimulus would lead to further capital outflows from emerging markets, which have benefited for the last two years from waves of cheap money printed by Western central banks.
Rupee buyers in the forex market seemed to be drying up, with the central bank suspected to have intervened in the last several sessions to support the currency, although dealers said its dollar selling was not substantial enough to stop the decline.
Meanwhile, some strategists made increasingly bearish calls on the rupee, with Credit Agricole saying that unless capital flows returned, it did not see the fundamental value for the rupee below 70 to the dollar and would not recommend buying it for fundamental reasons below 75. Deutsche Bank said on Wednesday the rupee could fall to 70 in a month or so.
In what was seen as a partial roll-back that some market participants say sent a mixed message, the RBI late on Tuesday took steps to support a bond market which has been bludgeoned by its rupee defence steps.
Some analysts said the move was similar to the Fed's "Operation Twist" begun in 2011 to buy long-end bonds.
"Policymaking is essentially in a quandary, as the framework comprises of multiple and often conflicting objectives," said Radhika Rao, economist at DBS Bank in Singapore.
"To this end, a single-minded focus on correcting the currency's course entails collateral damage - dampens equity and bond markets and carries risks to growth," she added. ( Reuters)
1. 10 pm:Markets yo-yo as Sensex now up 300 pts, rupee stuck at 65
The Indian markets have recovered quite a bit on buying mainly in metal, PSU, oil & gas, consumer durables and healthcare sectors.
At 1.11 pm, the BSE Sensex is at 18246.42, up 340.51 (1.90%) while the Nifty is up 5394.65, up 1.74 percent.
However, the market is still under pressure as the rupee hit a new record low of 65 against the dollar after minutes of the Federal Reserve's last meeting signalled the US central bank was on course to pare bond purchases this year.
The rupee continues to remain weak and has touched a new low of 65.50 against the US dollar,continuing its sharp slide among emerging market currencies after the Federal Reserve minutes hinted that the United States may start tapering its stimulus as early as next month.
According to UR Bhat of Dalton Capital Advisors, India is now paying the price for too much dependence on hot money.
In an interview with CNBC-TV18, Bhat said that emerging markets (EMs) have been huge beneficiaries of the US Federal Reserve's Quantitative Easing (QE) seen for the last several quarters.
"If there is going to be a tapering off then certainly we got to pay the price. And that is the price that we are paying. It is not as if something has happened suddenly," Bhatt added.
On the positive side, Bhat believes the government's corrective actions can inspire confidence and boost FII flows.
"The big doubt is about FIIs' continued love for India. If they don't withdraw too much money, I think the market should stabilise around 5200 level. The big bet is whether outflows would happen or not. If outflows were not to happen and if business is as usual, then the market would probably stabilise around 5000-5200 levels. But if not, if there is further outflow which cannot be ruled out, I think we have to take all the bets off the table," said Bhat.
10. 15 am: JP Morgan on rupee fall
According to JP Morgan, recent RBI measures had a negative impact on the economy. However, they believe that currencies of all emerging markets with large CAD have taken a beating.
Asked on the measures that the government may take, the brokerage firm said, "Don't see govt taking ad-hoc steps to boost sentiment.Diesel price hike will not change sentiment significantly."
JP Morgan is of the opion that the government needs to do everything to bring money into market. "Govt needs to restructure its reform plans."
10:00 am : Rupee is not the problem, government policies are the problem: Marc Faber
Swiss investor and editor of Gloom and Doom report, Marc Faber believes the economic policies of the current government have been a disaster and have taken a toll on both equity and bond markets.
In an interview with Economic Times, he said,' the rupee is weak because India has higher inflation than other countries, and the problem is that a weak rupee can lead to even higher inflation and India's ratings downgrade is quite likely."
He further blamed the Indian bureacracy for the currenct economic crisis.
"The government in India, through its incredible bureaucracy, has retarded economic growth in the last 20-30 years by at least 3% per annum in real terms. It's a miracle that the Indian economy has performed well, considering the quality of its government,' Faber added.
9. 25 am: Markets extremely volatile on rupee fall
Sensex is back in red. It's an extremely volatile session with Sensex down almost 50 points now. Nifty is trading at5308.40, up 0.07 percent.
Yes Bank is down 4.4 pct, IndusInd Bank down 1.1 pct, SBI down 0.9 pct, ICICI down 0.6 pct.
Meanwhile, the rupee has hit a fresh record low of 65.12 against the dollar,continuing its sharp slide among emerging market currencies after the Federal Reserve minutes hinted that the United States may start tapering its stimulus as early as next month.
The main reason for the rupee to fall 15 percent in the last three months is India's wide current account deficit. Fears of QE3 tapering aggravated the slide. In order to arrest the volatility in the forex market, the RBI started tightening its monetary policy July 15. It signaled increase in short-term rates by hiking marginal standing facility rate by 200 basis points. On 23 July and 8 August, it followed up with further tightening measures. All this while, the rupee continued to decline and interest rates kept going up. On 20 August, the RBI signaled a reversal of tightening policy.
According to Macquarie, the Reserve Bank of India is sending confusing signals on monetary policy, due to which rupee will continue to depreciate.
However, Aditya Puri, chief executive of HDFC Bank believes the RBI and the government are moving in the right direction.
"The movements in bonds and currencies reflect a dysfunctional market. Tuesday's decision by RBI was in the right direction. More relaxations need to be matched with import controls. I don't believe that raising import duties is anti-reform," Puri was quoted as saying by the Economic Times.
9. 15 am: Sensex turns green
The BSE Sensex have moved to green after falling more than 100 points in opening bell.
Stocks like Tata Motors have gained 2.1 pct (a day after its AGM), Infosys rises 0.8 pct, RIL gains 0.9 pct pushing the Sensex up. But, the markets are likely to take a beating today.
9. 10 am: Sensex in red; bank, realty stocks hit
The Indian markets extended losses for the fourth straight day. The BSE Sensex opened at 17795, down 117 pts, while the Nifty opened at 5260, down 40 pts.
BSE realty, banking indices are the top sectoral losers.Top Nifty losers -- DLF down 4.4 pct, ITC down 2.5 pct, Reliance Infra down 2.3 pct.Sensex losers -- SBI down 2 pct, GAIL down 2.2 pct, M&M down 1.8 pct, HDFC Bank down 1 pct
Macquarie told CNBC-TV18, that the RBI is sending confusing signals to markets and the rupee will continue to depreciate. "From here, noinvestor wants to buy Indian bonds."
9.05 am: Rupee hits 65, new record low
The Indian rupee hit 64.90 against the dollar at the opening today. Soon after, it touched 65on the back of bank's heavy dollar demand and poor market sentiments. At 9:10 am, the Indian rupee is at 65.05. It fell more than 1.4 per cent against Wednesday's close of 64.11.
Itclosed on Wednesday at 64.04 to the dollar - down 81 paise, or 1.27%, from the previous close.
Ashutosh Raina ofHDFC Banksaid, "Yesterday's Fed minutes confused the markets, not giving timing on tapering. Across the board, EM currencies sold off and the sell-off in equities are also adding to the pressure. Expect the rupee to open weak in the range of 64.7-65.
Stocks around the globe took a beating on Wednesday as investors couldn't find the clues they were desperately looking for from the just released Federal Reserve's July policy meeting. In the minutes, Fed policymakers indicated they are still on track to slow the central bank's $85 billion bond-buying program this year and end it in mid-2014, but gave no signal whether the scale-back could begin in September. Read more.
That belief already has drawn billions of dollars in capital back from countries like India, Brazil and China to US assets with investors seeking the relative safety of US equities.
The rupee on Wednesday hit a low of 64.33 to the dollar amid investor scepticism about the policies of the Reserve Bank of India and theManmohan Singhgovernment. Traders said the sell-off was intensified by "policy flip-flops" from the RBI.
Foreign direct investment inflows into India rose an annual 16 percent in June to $1.44 billion, a government statement said on Wednesday, the lowest monthly inflow so far in 2013.
In stock news, RelianceGroup ChairmanAnil Ambaniwill have to appear as a prosecution witness in a Delhi court today as the Supreme Court rejected a group company's plea that no additional witnesses be allowed at this stage of the trial.
Updates end for 21 August, Wednesday
RBI measures the stem the rupee decline failed miserably taking both the Indian and currency markets down even further today.
The rupee hit a new record low of 64.52 against the USD as heavy dollar buying from large state-run banks along with demand from custodian banks hurt the local currency.
The BSE Sensex and the Nifty ended at the lowest close since September 2012, down about 700 points from the day's high.
While the Sensex shut shop at17905, down 340points, the Nifty closed down 98 points at 5302.The Sensex is down more than 7 percent so far this month.
Sock markers wiped out their initial gains and ended the day in red.
ITC, Sun Pharma, Dr Reddy's Lab, Bharti Airtel, RIL, Sterlite, Hindalco, L&T and Tata Motors were the biggest losers.
Markets have fallen despite steps taken by the government and the Reserve Bank to support the beaten-down bond market. The RBI relaxed rules on mandatory bond holdings for banks, which would help protect lenders from large mark-to-market losses and said it would buy long-dated government bonds worth Rs. 8,000 crore.
Gold, however, hitnear 8-month high of Rs 31,225 due to a weaker rupee, while demand remained subdued ahead of the resumption of imports.
Former deputy governor of Reserve Bank of India (RBI) Subir Gokarn said India needs comprehensive and realistic solution to deal with the ballooning current account deficit, which is the root cause of all macro woes.
Earlier, Deutsche Bank said in a research note that the rupee could touch 70 level against the US dollar in a month's time, although some revival of the currency is expected by the end of the year.
To attract inflow of foreign currency, the RBI also simplified rules governing investments by non-resident Indians (NRIs) portfolio investments like equities and debt.
Under the Portfolio Investment Schemes (PIS) for NRIs, banks were given unique code for each branches, making it cumbersome for them to administer the scheme.
The government has been enhancing quantitative limits for FII investments in debt segment, including government securities (G-Secs) to help develop rupee debt markets, Parliament was informed on Tuesday.
According to JP Morgan report, the Indian financial sector should bottom out after the RBI's strong moves on capping bond yields. However, the immediate rebound will be impacted by some key negative factors such as slowing growth, currency volatility, continued imbalance between CAD and capital inflows, possible Fed tapering and pressure from oil prices.
Meanwhile, theMinistry of Finance is looking to lease out the 200 tonnes of gold which it had bought from the International Monetary Fund (IMF) in November 2009, according to a media report.
Sensex erases gains, down 400 pts after rupee hits 64.52
15:00 pmThe market have crashed further on sharp fall in index heavyweights like ITC , Reliance Industries , Infosys and ICICI Bank ,as rupee slipped to another record low of 64.52 against the US dollar.
The rupee weakened past 64.52 per dollar to hit a record low as heavy dollar buying from large state-run banks along with demand from custodian banks hurt the local currency today.
The Sensex is down 402.37 points or 2.21 percent at 17843.67, and the Nifty is down 118.75 points or 2.20 percent at 5282.70.
While the Sensex has lost 1400 points in the last four trading sessions, the Nifty has lost 450 points.
The Sensex ended at 19,367 on August 14, and is today trading at 17,923.
India Volatility Index is trading at 17 month high, up 9.5 percent to 29.81 since March 5, 2013.
The Bank Nifty is off highs, and is down 0.5 percent after earlier rising as much as 5.93 percent after the RBI eased cash and bond holding rules for banks late on Tuesday.
Book value or net worth of state-owned banks would become more opaque after the Reserve Bank of India eased bond holding rules, Morgan Stanley said in a report on Tuesday.
Brokers said the selling pressure was more confined tocompanies such as software exporters and drug makers withtheir exposure to overseas markets.
They said the falling of rupee to fresh all-timelow of 64.43 raised fears of slowing economic growth.
Traders say stability in the rupee will be the key for bonds from the medium-term perspective.
The rupee has lost 5 percent this week alone and is currently trading at 64.40 against the US dollar.
Clearly, a stable currency is the prime requisite for investment, both in business and markets.
14:45 pmGold steady near eight-month high on weak rupee
Meanwhile,gold futures in India traded in the vicinity of their highest level in eight months on Wednesday due to a weaker rupee, while demand remained subdued ahead of the resumption of imports.
The actively traded gold for October delivery on the Multi Commodity Exchange (MCX) was 0.15 percent lower at 30,765 rupees per 10 gram. It touched a high of 31,225 rupees intraday, near an eight-month high hit on August 19.
The rupee, which hit a record low again on Wednesday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.
In the overseas market, gold traders awaited more clarity from the US Federal Reserve on whether it would begin curbing its commodities-friendly economic stimulus from next month.
"India remains largely absent in the physical market amid tighter regulations and a weak currency," UBS said in a report to its clients. ( Reuters)
Sensex slips below 18000, Nifty below 5300
2:37 pm: The Sensex slipped below the 18,000 levelas the rupee remained under pressure and breached the 64 level after the Reserve Bank of India (RBI) said it will buy bonds to ease a cash crunch, and relaxed bond holding rules for lenders.
At 2:37 pm, the Sensex was down 253 points at 17992, while the Nifty slipped below 5300 to trade at 5280, its lowest level since September 2012.
Minutes from Fed's most recent meeting will be released today as investors look for cues regarding the timeframe of the US stimulus programme.
The rupee hits fresh all-time low, trading around 64.43 per dollar as heavy dollar buying from large state-run banks along with demand from custodian banks hurt the local currency on Wednesday. Traders said there was no signs of RBI's intervention in the spot market so far during the session.
The RBI took steps in July to prop the rupee and the central bank took fresh measures yesterday to do the same but the rupee remains in a free-fall.
Rupee hits new low of 64.43/$, Sensex loses 1,400 pts in 4 days
2:18 pm:The rupee once again breached the 64 level despite several attempts by the RBI to prop up the Indian currency.
At 2:18 pm, the Indian currency hit 64.43 against the USD, down 1.58 percent from yesterday's close of 63.43.
Yesterday, the rupee had touched an all-time low in intra-day trade by breaching the Rs 64 per dollar mark. But dollar sale by state-run banks acting on behalf of RBI helped the rupee to recover.
Deutsche Bank in a note on Wednesday said that the rupee may slide to 70 to the dollar in a month or so, although some revival is expected by the end of the year.
At 2:20 pm, the BSE Sensex was220 points at 18029, while the Nifty was down 70 points at 5332.The BSE Sensex is now down around 1400 points in last 4 sessions.
RBI will auction government bonds for a notified amount of Rs 15,000 crore as well as conduct Open Market Operations (OMO) purchase of government bonds up to Rs 8,000 crore on Friday.
"India's macro situation appears to be nothing short of a train wreck. RBI measures aren't helping either with the INR's free fall continuing despite efforts to curb rupee volatility and reduce FX outflows. Weak macro data validates our pared 4.5% GDP est. for FY14," said Religare Institutional Research in a report.
According to Biocon chief Kiran Mazumdar Shaw,incremental measures will not calm the economic panic. "We need swooping policy changes. Eg Approval of all FiPB proposals," she tweeted.
Industry experts are largely viewingRBI's measures as a short-term relief measure given the bloodbath on Dalal Street and the sinking rupee hitting fresh all-time lows day upon day.
1. 10 pm: Markets wipe out gains
The stock markets have wiped out early gains and enter the red zone.
The BSE Sensex is at 18241.34, down 0.03 percent, while the Nifty is at 5399.75, down 0.03 percent.
Bank Nifty down nearly 325 points from day's high. the BSE Sensex has lost more than 250 pts from day's high.
The Indian rupee weakened further to 63.64 against the dollar.
12. 35 pm: RBI's measures ill-equipped to tackle real problem, says Subir Gokarn
Former deputy governor of ReserveBank of India(RBI) Subir Gokarn believes India needs comprehensive and realistic solution to deal with the ballooning current account deficit, which is the root cause of all macro woes.
Gokarn finds the measures ill-equipped to tackle the real problem. "The tactical measures taken by the RBI are not addressing heart of problems the CAD. The pressure will continue till fundamental problems are addressed," he told CNBC-TV18 in an interview.
Shares of IT majors Infosys and TCS fall on concerns about their valuations relative to the market and on fears that the rupee may regain some of its recent losses as it looks oversold at current levels.
The rupee made a record low of 64.13 to the dollar on Tuesday despite various measure by India's central bank and the government since mid-July.
Infosys Ltdis down over 2 percent while Tata Consultancy Services Ltdfalls 1.5 percent,Wipro is down 0.6 percent.
India needs early elections and the jockeying has already begun: Bloomberg
Bloomberg on the other hand has taken a strong stand against the UPA government and said that India is not suffering from a currency crisis but it is rather facing a 'crisis of credibility.'
"There are things Singh can do now, administratively, to begin to restore confidence, such as his recent move to clear 1.7 trillion rupees' worth of projects that had been blocked by bureaucratic inaction. He can also try to use his unique credibility to revive the narrative of reform, to explain to ordinary Indians how somewhat abstract structural measures will benefit them and not just corrupt elites.
Yet it's hard to see how anything other than early elections will break the gridlock in New Delhi. Investors can't be certain that any new government will push forward with difficult reforms. They know for sure, however, that the current government cannot," argues Bloomberg. ( Read the full view here)
Why the panic over rupee, asks Paul Krugman
11:06: The rupee continues to remain under pressure even after the Reserve Bank of India (RBI) said it will buy bonds to ease a cash crunch, and relaxed bond holding rules for lenders.
However, noted economist Paul Krugman argues that Indians should not yet panic over the rupee fall as India's dollar denominated debt situation is not like the Asian crisis countries of 1997-1998 or Argentina in 2001.
"Now, the depreciation of the rupee will presumably lead to a spike in inflation - but it should be temporary.So at first examination this doesn't look like as big a deal as some headlines are suggesting. What am I missing?," he says in his blog here.
RBI steps a bandage to salvage short-term pain; this is a rally to sell
10:30 am The Bank Nifty surged 5.4 percent in early trade after the Reserve Bank of India eased cash and bond holding rules for banks on Tuesday.
The RBI relaxed rules on mandatory bond holdings for banks, which would help protect lenders from large mark-to-market losses and said it would buy long-dated government bonds worth Rs 8000 crore.
State Bank of India Ltd gained 5.5 percent, while ICICI Bank rose 4.5 percent.
However, Udayan Mukherjee, Managing Editor ,CNBC-TV18, cautions market should not get carried away this morning because of the rally in public sector banks, as the RBI intervention does not address the fundamental problems of the banking sector.
"All that they would have showed is a mark-to-market (MTM) loss at the end of the quarter which the market might have priced in partially. To the extent that MTM loss will be minimized, maybe reported profits will be higher. So, we should understand that MTM, which is going down and none of the other fundamental problems for which banks have been fundamentally getting downgraded, which is very sharply falling off credit growth and a huge balance sheet or a non-NPA problem. Those do not get addressed with this," said Mukherjee.
He further said that RBI'ss teps to shore up the rupee will pave way for a near-term rally, one should not think that the moves of yesterday actually mean that the RBI has successfully either fought off the battle on the rupee or will embark an easy monetary policy. This is patchwork, which will pull the yield back a bit, help banking stocks that would have rallied in any case because of the way they have been oversold.
EvenRidham Desai, MD & Head of India Research ,Morgan Stanley believes the market is oversold and at some point, the market is likely to rally. However, until the fundamental construct remains the way it is - we think this will be a rally to sell, not buy."
9. 50 am: Markets cool off, Deutsche Bank says rupee could touch 70
Markets have cooled off considerably from their opening bell highs; Sensex has lost around 150 points from its highest point of the day, but the index is still up 170 points.
Deutsche Bank expects rupee to touch 70 against the dollar in a month or so. However, it expects revival by end of year.
"We continue to believe that fundamentally the rupee is undervalued and has overshot its equilibrium level substantially, but as numerous episodes of past currency crises have amply demonstrated, under a scenario of deep pessimism, currencies can overshoot substantially and remain so for a long time," economists at the bank wrote in the report.
"India, we fear, is entering such a zone", it added.
The partially convertible rupee dropped to a record low of 64.13 per dollar on Tuesday and was trading at 63.38/42 on Wednesday, weaker than its close of 63.25/26. (Reuters)
Meanwhile, investors are dreading that the rupee's rapid and sharp decline may result in credit ratings downgrade for India. In fact, on Tuesday morning, JP Morgan downgraded India to neutral from overweight citing the rupee weakness as the primary reason for the downgrade. The brokerage house says India will continue to underperform unless rupee stabilises.
9.15 am: Markets recover following RBI steps
The Indian markets recovered today following RBI'ssteps to support the beaten-down bond market.
The BSE Sensex opened at 18642, up 300 pts while theNifty opened at 5490, up 92 pts.
Banking stocks are the top gainers with SBI rising 5.8 pct, HDFC Bank up 5 pct, ICICI Bank up 4.9 pct.
Financial Technologies is one of the biggest loser in the BSE Sensex, down by almost 7 percent.
The 10 year benchmark yield is down 70 bps to 8.3 percent.
Forget rupee. The 10year benchmark yield is down 70 bps to 8.3%. If this indiciates RBI is reversing it's welcome news.
- Ajit Ranade (@ajit_ranade) August 21, 2013
The RBI yesterday announced a slew of measures to ease liquidity in the banking system after its recent tightening steps aimed at pushing up short-term interest rates also lifted the long-term rates in the economy. Who will benefit from the move? As Firstpost notes in this article, "Definitely, banks. Bond, rupee and, in turn, equity markets will also benefit from the RBI move. Bond prices will rise, i.e. yields will crash. The rupee will strengthen, instilling confidence in investors." Read more here.
9.00 am: Rupee recovers, will markets rebound after RBI move?
The Indian rupee opened at 63.45 against dollar, slightly weaker than yesterday's close at 63.23. However, analysts predict it will regain following RBI measures. At 9.10 am, rupee recovered to 63.15 after a weak start.
Meanwhile, Congress leader Digvijaya Singh tweeted saying he would like to know the impact of dollar on currencies of other developing countries, suggesting that India is not the only country to suffer.
We share the concern of the falling value of ? against $. Would like to know the impact of $ on currencies of other developing countries
- digvijaya singh (@digvijaya_28) August 21, 2013
The BSE Sensex is likely to rebound, while the battered Indian rupee may see some recovery on Wednesday after the government and the Reserve Bank took steps yesterday to support the beaten-down bond market.
Pre-open trade suggests markets are off to a good start today.Bank Nifty surges 4.7 pct in pre-open after RBI eases cash, bond holding rules.SBI gains 5.5 pct, ICICI up 4.6 pct in pre-open after RBI steps.
Worried over interest rates rising following its steps to support falling rupee, the RBI has announced slew of measures to ease liquidity, including Rs 8,000 crore bond buyback, to ensure adequate credit flow to the productive sectors of the economy.
According to technical experts, the Nifty may seek support around 5,360-5,330, while face resistance around 5,445-5,470.Nifty fell to its lowest close in almost a year on Tuesday, weighed down by blue chips including Sun Pharma as the rupee hit another record low and on expectations of a cut in US stimulus as early as next month.
Amid rupee sliding below 64 to a dollar, global agency Standard & Poor's said it will maintain negative outlook for the country as currency depreciation is adversely impacting investor confidence.
Globally,it was a mixed close for the US markets on Tuesday as investors stayed cautious ahead of the release of FOMC minutes. European markets closed in the red.Asian markets were down in morning trade today. Emerging markets are expected to remain in focus after a brutal sell-off over the past two days.
Back home, the 10-bond yields also made a sharp recovery in trade yesterday. After hitting a five-year high of 9.4 percent, bond yields clawed back to end the day way below 9%.
Among the stocks to watch, National Spot Exchange has sacked its entire top management, including CEO Anjani Sinha, as the beleaguered bourse could manage to pay just over half of Rs 175 crore first tranche of payment due to investors Tuesday.
Banking stocks will also be in focus today after RBI allowedbanks to shift a part of their AFS portfolio to HTM. The measures will restrict a sharp rise in long-term yields and reduce MTM losses on banks' investment portfolios banks will benefit more from the reduction in MTM losses, withOBCandCanara Bankthe biggest beneficiaries of these measures. Lower wholesale rates will also benefit private banks.
Reserve Bank of India eased investment rules for NRIs in shares and debentures
17:30 The Sensex had today slipped below the psychological 18,000 mark for the first time since September 2012, before retracing losses to close 0.34 percent lower at 18,246. The markets closed off the day's low tracking recovery in the rupee.
The Indian currency ended at an all-time low of 63.25 for the fourth session in a row.
In yet another step aimed at stemming the decline in the rupee, the Reserve Bank of India eased investment rules for NRIs in shares and debentures of Indian companies listed on a local exchange. The central bank simplified some of the administrative channels for non-residents to invest in shares and debentures, even as these transactions under the portfolio investment scheme would be reported to it on a daily basis, it said in a statement on Tuesday.
Meanwhile,rating agency Moody's said that while the rupee depreciation was a new variable for the economy, the bleeding rupee would not to impact rating outlook.
15:30Rupee continues to trade off the day's low at 63.63 after earlier hitting a low of 64.11. 10-year bond yields too pulled back below 9 percent after touching a five-year high of 9.24 percent earlier today.
The Indian markets erased most of the day's losses butNifty fell to its lowest close in almost a year on Tuesday, weighed down by blue chips including Sun Pharma as the rupee hit another record low and on expectations of a cut in U.S. stimulus as early as next month.
The BSE Sensex closed down 0.34 percent at 18318, while the Nifty closed down 0.25 percent at 5401.
The current intensity of sell-off seen in Indian equities is similar to post Lehman crisis, so the situation is getting scary, Raamdeo Agrawal, Joint MD, Motilal Oswal Financial Services said in an interview with CNBC-TV18.
While talks of US Federal Reserve rolling back stimulus sooner than later has been making global markets nervous, he feels that the ongoing bloodbath on Dalal street has more to do with domestic factors.
According to him, Indian Inc will take a hit due to the rupee fall and it would be difficult for them to pass on rupee depreciation costs.
15:00 Sesa Goa surges on Hind Zinc stake sale report
Shares in Indian units of oil and mining group Vedanta Resources Plc surged after CNBC TV18 reported that the government has cleared legal hurdles to the stake sale in the company's unit Hindustan Zinc.
Vedanta's unit Sesa Goa , which holds 64.92 percent stake in Hindustan Zinc, is up 12.7 percent, while Hindustan Zinc gains 9.4 percent.
Also, Sesa Goa said on Saturday its merger with Sterlite Industries and the group's various Indian arms to create a single unit has become effective.
14:45 State-run oil companies fall after Moody's report
Shares in state-owned oil companies fell after Moody's said credit quality of Indian oil companies may weaken if the government continues to use the same subsidy-sharing mechanism as it did for the June quarter.
Moody's added the fuel subsidy for July-September will likely rise to Rs 35000 crore to Rs 40000 crore compared with Rs 25600 crore in April-June due to the ongoing depreciation of the rupee and the rising crude oil prices.
The rupee slumped to a record low in early trade on Tuesday and bond yields hit another five-year high as Asia's third-largest economy bore the brunt of growing money flows out of emerging markets.
Oil and Natural Gas Corporation is down 3.98 percent while Indian Oil Corporation fell 0.6 percent.
Gold futures eased from their highest level in eight months on profit-taking as the rupee came off its early low and overseas markets fell.
At 2:47 p.m., the actively traded gold contract for October delivery on the Multi Commodity Exchange (MCX) was 1.83 percent lower at Rs 30,595 per 10 grams, after hitting a high of 31,278 rupees in the last session, the level last seen on December 18.
Technical indicators show highly overbought conditions, leading to profit-booking, said Gnanasekar Thiagarajan, director with Commtrendz Research.
Thiagarajan said the outlook was negative for gold prices on a weekly basis, with the U.S. Fed minutes and subsequent news of tapering off likely to dent gold prices. ( Reuters)
Uncertainty cripples markets, Citi cuts Sensex target to 18,900
13:30 : Global investment bank Citigroup has cut its year-end target for the Sensex to 18,900 from 20,800 earlier, citing increasing uncertainty after the rupee's slide despite the Reserve Bank of India's measures to stem the fall.
The trend and the mood in the market are bearish, but Citigroup has warned investors to watch out for any short-term reversals.
The Nifty is currently hovering close to 5400 and the Sensex is currently holding above 18,200.
13:15 Pendulum is swinging back in favor of advanced countries
According to a Bloomberg report, Asia's role as the world's growth engine is waning as economies across the region weaken and investors pull out billions of dollars.
"The clouds forming in Asia as liquidity tightens and China's slowdown curbs demand for commodities and goods are fueling a selloff of emerging-market stocks, reversing a flow of money into the region in favor of nascent recoveries in the US and Europe," says the report.
India 'not quite yet' a buying opportunity: Mobius
12:55 pmThe steep fall in the Nifty raisesthe question whether this is the time to buy.
According to Mark Mobius, executive chairman of Templeton Emerging Markets Group, the equity markets need to fall further to represent a buying opportunity for long-term investors.
India is beset by high inflation, slowing growth, a ballooning current account deficit and a record low currency. At the core of the problem - foreign capital outflows precipitated by expectations cheap liquidity will come to an end with the September wind-down in the US Federal Reserve`s asset purchase programme.
"Indian markets have not fallen far enough to make them attractive," Mobius was quoted as saying by CNBC.
More pressure is in store for India's currency, Mobius warned. "With the US dollar getting stronger, the rupee could get hit further," he said, adding "significant declines" may be on the horizon unless controls were imposed to limit capital outflows.
According to investment bank Morgan Stanley,the Indian markets seem to be reaching an oversold territory, which implies that the market is liekly to rally soon. However, it cautioned that "until the fundamental construct remains the way it is - we think this is will be a rally to sell, not buy."
Only rupee will improve sentiment on India
11:26 amAccording to a Bank of America Merill Lynch report, the single biggest factor making investors nervous on India is the currency. "A stabilization of the currency would make investors more positive on India. While the Govt has taken a series of steps to stabilize the currency, it has not worked partly due to nervousness on the Fed tapering. Even after the start of these measures, India is the 3rd worst performing currency amongst EMs," saidJyotivardhan Jaipuria, research analyst at DSP Merrill Lynch.
Sentiments of investors on India have turned negative and they seem genuinely concerned of the risk of the policy mistake in order to curb the currency volatility.
"Indian markets are now less loved than what they were 3 months back. However, these sentiments are still some distance away from the extreme bearishness of the past," the report added.
But it also cautioned that any policy mistake could likely result in accelerated selling by the FIIs which could bring down the markets rapidly.
Cong only worried about saving its chair, not rupee, says Modi
11:15 amWith rupee at an all-time low of 64.05/ USD and Nifty too opening below 5400, there is no doubt in the minds of most that India maybe heading towards deeper trouble. Taking advantage of the market carnage, Gujarat chief minister Narendra Modi hit out at UPA,accusing the government of not caring about the economy.
"The country has drowned in despair, Congress is only worries about saving its chair. The rupee has fallen rapidly in the past 3 months. UPA has failed to stop it, " said Modi.
"If the rupee keeps falling like this and inflation keeps increasing, other countries will start taking advantage of India," he added.
11:oo am Moody's says factors underpinning rupee fall part of Baa3 rating
Moody's India sovereign rating of Baa3 incorporates macro-economic challenges of weaker growth, a fall in the rupee and the twin deficits, credit ratings analyst Atsi Sheth said on Tuesday. "So while (the) rupee depreciation may be a new development, the factors that underpin it are not, and have been incorporated into India's Baa3 rating," Sheth said in an e-mailed response to Reuters.
For India to meet the fiscal deficit target will be "very challenging" this year, Sheth added, citing lower-than- anticipated growth and a steep fall in the rupee.
Markets are overreacting to rupee decline, says Arvind Mayaram
10:44 am: Despite rupee free fall, theDepartment of economic affairs (DEA) secretary Arvind Mayaram told CNBC-TV18 that the markets were overreacting and thatfears of government imposing capital controls were completely unfounded.
He further added that fears of current account deficit being difficult to manage are irrational.
Defending the rupee slide, Mayaram said all emerging economies are under pressure, with the Indonesian Rupiah, Brazillian Real doing worse that the Indian currency.
The Malaysian ringgit is the weakest in over three years, while Thai baht hit a one-year low today.
Meanwhile, the Sensex recovered more than 200 points from the day's low and was trading at18149.
However, banks remained under pressure after surge in bond yields will result in heavy mark-to-market (MTM) losses in SLR and non-SLR bond portfolios for banks.
The rupee too istrading at 63.71 versus the dollar, after falling as much as 64.13 in early trade.
The Reserve Bank of India has not been able to stem the rupee's selloff, despite intervention and curbs on outflows from companies and individuals, which have dented India's stock and bond markets.
10:24 am: RBI trying to save rupee
According to a Reuters flash, traders say the Reserve Bank of India is selling dollars via state-run banks starting around 63.85 rupee levels.
Reacting to the rupee free fall, Biocon founder Kiran Mazumdar Shah said the government can do very little about the decline.
"Is this the time to scrap P notes n allow Foreign investors," she tweeted.
The Rupee is in a free fall n there seems to be very little we can do about it. Is this the time to scrap P notes n allow Foreign investors
- Kiran Mazumdar Shaw (@kiranshaw) August 20, 2013
The Rupee is in free fall. I guess the ban on mining in Goa n Karnataka will have to be lifted to get some dollars in
- Kiran Mazumdar Shaw (@kiranshaw) August 20, 2013
10. 00 am: JP Morgan downgrades India shares to neutral
JP Morgan has downgraded Indian shares to "neutral" from "overweight", citing strain in balance of payments, while upgrading China shares to "neutral" from "underweight".
The brokerage adds it is late in downgrading India, but if the rupee continues to slide it would continue to underperform.
Citi also lowered its target for the BSESensexto 18,900 from 20,800, citing increasing uncertainty after the rupee's slide despite Reserve Bank of India's measures since mid-July.
9.22 am: Rupee breaches 64/USD
The Indian rupee has reached a new record low.The rupee fell to 64.05 to a dollar, a record low, breaching a key psychological level of 64.
The rupee has been down over 5 percent in last six days.
The rupee extended losses past 64 to a dollar on continued concerns about how India will fund its current account deficit in case fund flows taper out of emerging markets.
Mohan Shenoi,Kotak Mahindra Banktold CNBC-Tv18, "Rupee depreciation is largely a local phenomenon. Weak equity markets on concerns of decelerating growth is impacting the rupee. A depreciating rupee is making unwinding of tight liquidity difficult. Rupee is expected to depreciate further today and is likely to test 64/USD levels."
9. 10 am: Markets open in red, Sensex down more than 300 pts
The Indian markets opened in the red for a third consecutive today.
The BSE Sensex openedat 17977, down 320 pts, whilethe Nifty opened at 5308, down 106 points. The BSE Sensex is down nearly 1400 pts in just 3 days.
The BSE Sensex closed almost 300 points lower on Monday at 18,307. The BSE Sensex has lost 1000 points in the last two trading sessions alone. Sensex down almost 1 percent or 165 points in pre-opening trade. Nifty down more than 1 percent in pre-open trade.
9.00 am: Rupee headed to 64 against dollar?
The Indian rupee opened at new record low of 63.76, while the Indian stock markets are likely to open lower for a third consecutive day today.
The INR crossed all-time lows of Rs 63.13 to the US dollar post India's actions on capital controls. The INR weakness is feeding to equities and bonds with the Sensex and Nifty down by more than 4 percent each while the 10-year benchmark bond yield trades at over five-year highs.
The Reserve Bank of India has proven unable to stem the rupee's selloff, despite intervention and curbs on outflows from companies and individuals, which have dented India's stock and bond markets.
Meanwhile, Asian stocks opened lower on Tuesday under a cloud of uncertainty about when the US Federal Reserve will start to reduce its stimulus, which pushed up yields on US Treasuries to two-year highs.
Shares of India-focused exchange traded funds were sharply lower in New York stock market trading.
Investor anticipation of the Fed's move to slow its purchases of bonds has resulted in higher yields on government bonds, raising the attractiveness of the dollar and dollar-denominated assets.
Why are the rupee and the Indian stock markets crashing? As R Jagannathan explains here, "The UPA government's credibility on the economy has fallen so low that it ends up achieving the exact opposite of what it intends. "
"The Reserve Bank placed new curbs on external remittances to shore up the rupee, but the currency is sinking further. P Chidambaram told us the other day that the 770-point fall in the Sensex last Friday was because our markets were closed for I-Day. Well, on Monday the index fell by a further 290 points to tell him that he is wrong." Read more here.
Even Mark Mobius, executive chairman of Templeton Emerging Markets Groupis bullish on emerging markets, he is less optimistic on the outlook for India. He said he is concerned about the country's bureaucracy. "They're just moving too slowly," he said, adding the barriers to investment are too high. While he still invests in the country, "it's not at the top of the list."
In stock specific action, NSEL is heading towards a payment default. FMC sources say the exchange has so far managed only Rs 68 crore in the escrow account created for investors, but faces a payout of Rs 174 crore today as part of its 30-week payout plan.
Updates end for 20 August, 2013
The rupee today breached the 63 level to end at 63.13 against the US dollar.
Yields on the 10-year benchmark bond hit a five-year high of 9.24 percent.
Yields are inversely proportional to prices, i.e. bond prices crashed due to rupee free fall. Data by CNBC-TV18 shows, the rupee marked its biggest single day fall in the last 10 years by plunging 2.8 percent in the last two trading sessions.
According to analysts,fears about more steps from the Reserve Bank of India (RBI) to shore up rupee is weighing on yields. Moreover, financial markets are not optimistic about UPA's ability to revive growth.
RBI has undertaken several measures to drain excess liquidity in the banking system and curb forex outflows, in a bid to support the rupee.RBI raised short rates through marginal standing facility and mopped up cash through the liquidity adjustment facility on July 17, although Governor Duvvuri Subbarao had maintained that the central bank's objective was to reduce exchange rate volatility and not its level. But anticipating this move,foreign institutional investors had already pulled out $4 billion from investment in debt.
Then on 8 August, the RBI announced o that it would auction Rs 22000 crore of government cash management bills every Monday. As if these measures weren't enough,RBI partially rolled back the currency's convertibility and imposed capital controls on resident Indians.
The central bank also reduced the limit under the Liberalised Remittance Scheme from $200,000 to $75,000, which further spooked investors.
The Indian currency has lost 15 percent this year-to-date.
With signs of US tapering its bond buying programme, FIIs are pulling out and there is general mayhem in the market, Dipen Sheth, Head-Institutional Research, HDFC Securities told CNBC-TV18.
Worsening financial scenarios, tighter credit conditions and rising burden of structural adjustments are likely to diminish prospects of recovery in the short and medium term.
Clearly, the government's defence of the currency failed to stop a declining rupee from plunging further but exacted a rising toll, with bond yields surging to five-year highs and investors demanding higher returns in an auction of cash bills.
Policymakers' measures to prop up the currency, which has tumbled 12 percent against the dollar so far in 2013, have thus far proved ineffective, making it the worst performer in emerging Asia and threatening to drive India towards a full-blown crisis.
The rupee's slide has fuelled expectations of more action from the Reserve Bank of India (RBI), which last week curbed outflows from companies and individuals, roiling stock and bond markets.
"A depreciating rupee will result in increased costs for various companies, thereby impacting margins. Thus, even at lower stock prices, the valuations have not turned appealing," said Dipen Shah, head of Private Client Group Research, Kotak Securities.
"Rupee has remained weak despite various measures undertaken by the Government and RBI. This is due to the high level of CAD. The FM has reiterated his intent on controlling the CAD to about $70bn in the current fiscal and financing the same without draining forex reserves. Further announcements on attracting investments in infrastructure and other core sectors will likely attract more forex flows and instill some confidence in the rupee. This may have a consequent positive impact on market sentiment," Shah added.
Deteriorating economic troubles at home have added to the currency's woes.
The government is struggling to reduce its current account deficit, which currently stands at 4.8 percent of gross domestic product (GDP), while attempts to push through structural reforms by relaxing restrictions on foreign direct investment have seen little progress.
The Sensex fell 1.56 percent, or 290.66 points, to end at 18,307.52, adding to Friday's 4 percent fall, marking its lowest close in nearly four months.
The Nifty slumped 1.69 percent, or 93.10 points, to end at 5,414.75, marking its lowest close since September 11, 2012.
Investors are also waiting to see if minutes of the Federal Reserve's last policy meeting due on Wednesday will provide some clarity on when it might start scaling back stimulus.
Pages: 1 2
More From Firstbiz Staff.