Monday April 22, 2019
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Indian equities, rupee in free fall on another ‘Manic Monday’

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Mumbai: Another “Manic Monday” saw a key Indian equity index log its steepest ever closing fall in point-terms, spooked by a crash in Chinese bourses, unmindful of the assertions by policymakers that the turbulence was transient and the country’s economy remained strong. In this turmoil, the Indian rupee also fell to its lowest in two years at 66.74 to a dollar. The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) lost as much as 1,624.51 points, or 5.94 percent which was the steepest in terms of points, surpassing the previous highest closing loss of 1,408.35 points on Jan 21, 2008. In terms of percentage, the loss of nearly 6 percent on Monday was around a half of the steepest fall of 11.13 percent in the Sensex, which was logged on May 17, 2004, data available with the Mumbai bourse showed. In fact, all these were Mondays.

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The wider, 50-scrip Nifty of the National Stock Exchange (NSE) followed a similar trend to close 491 points, or 5.92 percent, down at 7,809 points. In both bourses as much as Rs.7 lakh crore ($100 billion) was wiped out in terms of market cap. At BSE, out of 2,835 companies that traded on Monday, 2,477 of them declined. Just 303 managed to stay afloat. In terms of Sensex, all the 30 shares that go into the bellwether’s basket ended in the red.
So massive was the crash that top policymakers, led by Finance Minister Arun Jaitley and Reserve Bank of India (RBI) Governor Raghuram Rajan sought to talk the market up, by saying the the core fundamentals of the Indian economy were strong and the turmoil will tide over. “Factors responsible for the markets fall are entirely external. There isn’t a single domestic factor,” said Finance Minister Arun Jaitley at a conference here. “The turbulence is transient and temporary in nature. Markets will settle down once the turbulence is over.” Rajan spoke a similar language and also tried to calm the currency market vis-a-vis the rupee. “I’ll say that relative to other countries India is in a good position with strengthening growth, a low current account deficit and narrowing fiscal deficit, moderating inflation, low short-term foreign currency liabilities and sizeable exchange reserves,” he said.

Analysts said weak global cues emanating from a continuous slide in the Chinese markets, along with concerns over the stalled domestic economic reforms program were the main reasons for Monday’s mayhem. “International investors are pulling-back funds from emerging markets especially China. There is a slowdown there. The clear and present danger now is the slowdown impacting the US and European based companies,” Anand James, co-head, technical research, Geojit BNP Paribas. A look at the sector-wise indices showed how widespread the losses were in the Indian markets. All the 12 sub-indices of the BSE closed deep in the red. Banking, auto, healthcare, capital goods particularly came in for hammering.

The losers on Monday were led by Amtek Auto, down 25.19 percent at Rs.48, followed by Wockhardt, down 21.26 percent at Rs.1,301.75, Vakrangee, down 20 percent at Rs.100, BF Utilities, down 19.44 percent at Rs.476.80 and HDIL, down 18.99 percent at Rs.58.65. Major Sensex losers were: Vedanta, down 15.30 percent at Rs.80.25, Tata Steel, down 13.11 percent at Rs.206.15, Gail India, down 12.78 percent at Rs.271.90, ONGC, down 11.17 percent at Rs.227.35, and Bajaj Auto, down 9.09 percent at Rs.2,188.45. Elsewhere around the globe, Chinese stocks crashed pulling down the benchmark Shanghai Composite Index 8.45 percent to close at 3,211.2 points. The Shenzhen Component Index also shed 7.27 percent to end at 10,983.42 points. The Hong Kong stocks also dived for the 7th consecutive trading session on Monday. The benchmark Hang Seng Index dropped 1,158.05 points, or 5.17 percent, to close at 21,251.57 points. It traded between 21,136.48 and 21,679.45. The massive fall in the Chinese stock market comes from the disappointment that Beijing did not announce expected policy support over the weekend after the country’s main market indexes shed 11 percent last week, brokerage Share khan said. Going ahead, all eyes were on the opening bell of Tuesday. They were worried if history would repeat itself. For on Jan 22, 2008 a day after “Manic Monday” the Sensex at one point had shed 2,273 points. It was only after the finance ministry’s intervention that the losses were pruned to 875 points.

(IANS)

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RBI May Recoup Reserves, Strong Inflow of Foreign Funds And Benign Oil Prices Strengthening Indian Currency

A major factor supporting the rupee is the strong prospect of better fund flows from abroad.

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Experts now see a chance for the RBI to recoup the reserves it spent in 2018 defending the rupee. Pixabay

A strong inflow of foreign funds and benign oil prices have strengthened the Indian currency but what has worked best for the rupee is the fading impact of war hysteria. Experts now see a chance for the RBI to recoup the reserves it spent in 2018 defending the rupee.

Putting a number to this, Gurang Somaiya, currency analyst at Motilal Oswal, said: “It is possible that RBI may limit some of the appreciation and recoup some of its lost reserves… but it may only come if the rupee strengthens to around Rs 68.20 a dollar.”

Explaining the factors at play, Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, said: “Post-Abhinandan (shooting down of the IAF pilot), geopolitical risk has subsided which has boosted investor sentiments.”

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The decline in crude oil, which accounts for a large import bill for India, directly affects the exchange rates.
Pixabay

Banerjee added that the gains of the rupee will help the Reserve Bank of India recoup reserves which it lost last year in a bid to arrest its fall.

“The rupee appreciated and closed at 70.14 for the last week on the back of strong flows and fading impact of war hysteria,” said Sajal Gupta, Head Forex and Rates, Edelweiss Securities.

In addition, Gupta said that some “big flows are lined up next week. Maybe Arcelor Mittal money can hit the Indian markets which can lead to some more appreciation towards 69.50 unless the RBI intervenes”.

However, the rising dollar index is causing nervousness and any breakout may lead to a reversal in the rupee’s trend, said Gupta. Somaiya said that RBI may choose not to intervene as the central bank’s prime aim was to arrest volatility.

“Yes the rupee is inching below the 70-a-dollar mark but then the (general) election can cause massive volatility. Also, it is seen that a lot of central banks are getting into a dovish stance owing to the fears of global slowdown.”

The RBI had to stop the slump in the rupee late last year after it touched an all-time high of 74.47 on October 11 following the rising crude oil prices.

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However, the rising dollar index is causing nervousness and any breakout may lead to a reversal in the rupee’s trend, said Gupta. Somaiya said that RBI may choose not to intervene as the central bank’s prime aim was to arrest volatility. Pixabay

The Brent Crude touched $86-a-barrel mark in early October but started to ease following the US decision to exempt 8 countries, including India and China, to continue buying oil for six months from Iran despite sanctions.

The decline in crude oil, which accounts for a large import bill for India, directly affects the exchange rates.

A major factor supporting the rupee is the strong prospect of better fund flows from abroad.

Also Read: The Dining Table Starts Turning To The DIEning Table, Is Eating Alone Healthy?

“Inflows into India have clearly turned positive since the end of January. The flows in February at Rs 17,720 crore is the highest since November 2017. The trigger for this inflows is the dovish statement that came from the Fed at the end of January,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

India’s foreign exchange reserves stood at $401.78 billion as against $393.13 billion in November last year. As the data suggests, with improving macros, the forex is already on the recovery path. (IANS)