Indian equities went into a freefall again on Tuesday, shedding 3%, as the rupee’s fall to a record low and weak Asian markets spooked investors. The nod to the food security Bill from the lower house of Parliament added to the nervousness as concerns over a widening fiscal deficit mounted.
The rupee hit a record low of 66.19 against the dollar on Tuesday, driving the benchmark Sensex down 590 points, or 3.18%, to 17,968. The 50-share Nifty was down 189 points, or 3.45%, at 5,287.
“Very clearly, the passage of food security Bill was not well received by the market. At a time when the government is trying hard to meet the balance of payments, the food security Bill will further increase the deficits. The rupee will depreciate further and we expect the market to remain weak in the near term,” said a senior official from ICICI Securities, on condition of anonymity.
India was not the only market washed in red on Tuesday. Asian and European stocks fell over concerns about the prospect of a military strike against Syria by the US government. In Asia, Jakarta Composite and Straits Times declined the most at 3.7% and 1.63%, respectively. Shanghai Composite was the only index to end in the green in Asia with gains of 0.34%. The major European indices, the FTSE 100, DAX and the CAC opened weak and were trading deep in the red — down anywhere between 0.63% and 1.54% — at about 5 pm IST.
Back home, foreign institutional investors (FIIs) sold shares worth $207.5 million on Tuesday, taking their monthly net sales to $787 million. In the last seven sessions, they have offloaded $1.02 billion worth of shares.
Foreign brokerage Goldman Sachs, in a recent research note, highlighted the risk of a potential reversal in FII inflows: “Very little foreign selling has occurred in Indian equities relative to the massive foreign inflows over the past few years. We see increasing risk of a potential ‘flow reversal’ in equities.” Bank of America Merrill Lynch had cautioned last week that any significant sell-off from overseas