NEW DELHI: There was no respite for bulls on Dalal Street as domestic benchmark indices joined their global counterparts and fell for the second straight session on Monday as the rupee continued to decline against the dollar.
A weak rupee is bad not just for the stocks market as it leads to further outflows, it also has the potential to hurt the Indian economy as imports will get costlier. The prospects spooked investors.
The 30-share pack Sensex declined 364.91 points or 0.67 per cent to close at 54,470.67. Its broader peer NSE Nifty declined 109.40 points or 0.67 per cent to 16,301.85. The indices have closed in the red for the fifth time in the last six sessions.
Equity investors’ wealth, reflected in the total market cap of BSE-listed firms, fell by Rs 3.17 lakh crore as the market cap stood at Rs 252 lakh crore.
Market at a glance:
- RIL sees heavy selling after the March quarter show, down over 4%
- India VIX, barometer of volatility, rises 4% to above the 22-level
- LIC IPO subscribed 2.84 times so far on the last day of bidding
- CanFin Homes drops 6% after reports say fraud detected at co
- IT stocks rally amid weakness in rupee; HCL Tech up 3%
Among the bluechip names, PowerGrid was the biggest gainer, rising 3.13 per cent. HCL Tech, Infosys, Bajaj Auto, Divi’s Labs, Bajaj Finserv, Maruti Suzuki, HDFC and Shree Cement were other major gainers.
Reliance Industries was the top loser in the Nifty pack, falling 4.30 per cent. Nestle India, Hero Moto, IndusInd Bank, Tata Steel, Coal India, Tech Mahindra and Adani Ports were other names that ended in the red.
Broader market indices ended lower, underperforming their headline peers. Nifty Smallcap fell 2.12 per cent and Nifty Midcap dipped 1.78 per cent. Nifty 500, the broadest index on NSE, ended down 1.09 per cent.
BASF, Fine Organic, Aegis Chemicals, Oil India, Federal Bank and ABB India were top gainers from mid and smallcap indices, rising in the range of 2-10 per cent.
Canara Bank, JSW Energy, Tata Power, Hindustan Copper, Vardhman Textiles and Bajaj Electricals were major losers from the broader market space, declining 6-10 per cent.
Barring Nifty IT which rose 0.05 per cent, all sectoral indices on NSE ended in the red. Nifty Media was the top loser, down 2.65 per cent. Nifty PSU Bank and Nifty Metal were other losers that dropped over 2 per cent.
Here are key factors that led the market fall:
Strong US jobs data
Data released on Friday showed nonfarm payrolls rose by 428,000 jobs in April. Economists polled by Reuters had forecast payrolls would rise by 3,91,000 jobs. Estimates had ranged from a low of 1,88,000 to a high of 5,17,000. A rise in jobs data underscored the US economy’s strong fundamentals despite a shrinking of GDP in the first quarter. This has raised fears that the US Fed may keep rate hikes aggressive until inflation is controlled in the world’s largest economy.
Rupee at record low
The strong US jobs data and prospects of aggressive Fed rate hikes sent dollar rising against emerging market currencies and the rupee was no exception. The rupee depreciated to hit a low of 77.1325 against the dollar in early trade. With this, the domestic currency breached the previous record low of 76.98 hit on March 7. The US dollar index, which measures the dollar against a basket of six major currencies, last traded at 103.98 against 103.79 in the previous day.
FPI outflows
A weakening rupee and rich valuations in India do not bode well as far as foreign flows are concerned. Data showed foreign portfolio investors have already pulled out Rs 6,417 crore worth equities this month and about Rs 1,33,579 crore in 2022 so far. A weak rupee eats into FPI equity returns. Rich valuations are not helping either. “Even after the correction, Nifty50 is trading at around 19 times FY23 earnings. This is higher than the long-term average of 16 times and certainly not a buyable valuation, particularly when equity markets globally are facing many headwinds like risk of growth slowdown, Ukraine war and supply chain disruptions caused by stringent lockdown in China,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
US futures, Asian markets
S&P500 June futures fell 42.25 points or 1.03 per cent to 4,077.25, hinting at weak start to US markets later in the day. US stocks had closed lower on Friday and Thursday as well. The poor sentiment also weighed heavy on Asian markets, which open before domestic bourses. Markets across Asia were down up to 2.5 per cent. Japanese Nikkei index was down 2.3 per cent. Taiwan and Korea markets fell up to 1.7 per cent. Australian shares were down 1.8 per cent. Mainland China and Hong Kong markets were closed for the day on account of public holidays.
Technical weakness
Nifty50 had on Friday witnessed an indecisive Doji candle on the daily chart. On the weekly charts, it was the fourth week when the index formed a bearish candle, emphasising the bear domination in the market. The index was trading below its key moving averages. Analysts felt the pain in the market was unlikely to ease in the near future. “Honestly speaking, we did not expect the fall to extend below 16,500 but when global uncertainty comes, no level is respected. If we take a glance at the daily time frame chart, we can see ‘Pennant’ pattern target in the vicinity of 16,200-16,000, which is not far away from current level. Hence, we would rather wait for some reversal this week,” said Sameet Chavan of Angel One.
