Triggered by a fall in global markets and depreciating rupee amid fear of Chinese currency devaluation, the key benchmark indices slid 2.5 per cent for the week ended August 21. The BSE Sensex and NSE Nifty dipped 701.24 points and 218.60 points at 27,366.07 and 8,299.95, respectively, during the week.
Overall market breadth remained weak as out of 50 shares in the Nifty pack, 39 stocks declined while 11 stocks advanced during August 14 and August 21.
The week saw some buying in pharma and FMCG stocks while selling was visible in realty, commodities and metal stocks. Among the sectoral indices on the Bombay Stock Exchange (BSE), the BSE Realty index tumbled the most — 9 per cent at 1,300.48 on August 21 from 1,429.03 on August 14, it was followed by BSE Metal index (down 5.20 per cent at 7,400.37), BSE Oil & Gas index (down 3.77 per cent to 9,149.21) and BSE Bankex (down 3.73 per cent at 20,687.70). On the other hand, BSE Healthcare index, BSE FMCG index and BSE IT gained 2.11 per cent, 1.10 per cent and 0.05 per cent, respectively, during the period.
During the week, Bank of Baroda (up 8.27 per cent), Lupin (up 4.70 per cent), Sun Pharma (up 4.48 per cent), ITC (up 3.96 per cent) and ACC (up 2.51 per cent) jumped the most in the Nifty pack. Share price of Vedanta, Zee Entertainment and Axis Bank slid 11.67 per cent, 8.72 per cent and 7.84 per cent, respectively, during the week.
Vivek Gupta, CMT, director research, CapitalVia Global Research, said, “Weakness in global markets, softening rupee and fear of Chinese yuan devaluation dented market sentiments this week. Movement of index in near term will depend on further reform initiatives to be taken by the government and also expiry of derivative contracts of August month.”
Jimeet Modi, chief executive officer, SAMCO Securities, said, “Markets tanked during the week fearing that the rupee depreciation will accelerate in order to keep pace with yuan devaluation of around 4 per cent. RBI Governor has also hinted that effective policy responses will be needed to keep rupee competitive keeping in mind the competitive position of our country’s exports. Depreciating rupee may lead to short-term outflow of funds from the stock markets.”
According to the website of NSDL, foreign institutional investors or foreign portfolio investors remained net sellers in the equity market segment as they sold shares of worth Rs 768 crore in the week.
“The complete wash out of the Parliament session without conducting any business has sent trembling signals across the global investing community, leading to large-scale outflow of funds from the stock markets,” said Modi.
Meanwhile, during the week gone by, RBI took the policy decision to grant the licenses for Payment Banks to 11 entities including Reliance Industries, AB Nuvo, Airtel, and others, which will usher in an ecommerce revolution in the country.
Moody’s cut India’s growth forecast to 7 per cent from 7.5 per cent for 2015-16 citing slow implementation of reform agenda.
Rupee fell around 1 per cent during the week. It declined to 65.83 on August 21 from 65.12 on August 14.
Modi of Samco Securities believes that the volatility in the rupee is expected to go up. Any further devaluation of yuan from the current levels may cause a domino effect on other countries currencies including the rupee and spark redemption from emerging markets including India.