Rupee breaches the 48 mark

The BSE Sensex opened yesterday at 2758.16 and touched a near eight year low of 2640.58 before closing for the day at 2680.98, a net fall of 149.14 points or 5.27 per cent. The lowest level seen by the Sensex prior to this was on January 29, 1993, where it closed at 2680.79. The National Stock Exchange’s S&P CNX Nifty Index lost 5.16 per cent (47.45 points) to close at a 32-month low of 872.25.

Stocks like Moser Baer, Hughes Software, CMC Ltd, Polaris and Global Telesystems, all technology stocks, hit the 20 per cent lower circuit, while ACC, Infosys Tech, NIIT, Satyam Computer and SBI were locked in 10 per cent lower price band at close. In the specified group, 169 including 28 index-based counters registered considerable losses.

Since the past week or more, FIIs have been net sellers of Indian stocks worth around Rs 200 crores. Of this, on Friday, the FIIs sold Rs 278.70 crores and bought Rs 168.90 crores, resulting in a negative net investment of Rs 109.80 crores on just one day (Friday, Sept 15).

“This is nothing but panic and redemption-based selling,” said an executive of a top US-based fund major requesting anonymity. The US government and the Securities and Exchange Commission (SEC) is expected to give directions to their local players as well as FIIs as the US markets open.

Since the aerial attacks last Tuesday, most of the US-based funds operating in India are understood to have been asked to stay liquid and keep more cash than equity stocks. “Coupled with the possible downslide in stock prices in majority of the equity markets of the world it is but natural for the fund manager to keep more cash than equity,” said an operator on the equity desk of a leading FII.

The finance ministry’s move on Sunday to take steps to boost the markets by hiking the FII investment limit and look at the possibility of introducing margin trading had little impact on the overall sentiment.

Rupee breaches the 48 mark

The rupee breached the psychological 48 mark against the dollar to touch an intra-day low of 48.42 before closing at yet another low of 47.85/90 .The recovery was a result of direct intervention by the Reserve Bank of India (RBI). Late support from a few state-run banks also helped the rupee recover from the losses some of its losses. At its lowest, the rupee had weakened by around 3.5 per cent against the dollar since the start of this year, compared with an average annual depreciation of 5-6 per cent.

According to dealers, dollar-supplies from the large state-run banks may have been on behalf of the RBI.The RBI on Saturday had assured the markets of meeting any temporary mismatch in demand and supply of dollars through direct and indirect interventions. “The market is nervous but there is no panic. The central bank is closely watching the situation and will step in to lend confidence to the market,” a RBI source said.

The rupee was pulled down by sustained heavy dollar demand from all quarters in the face of acute shortage of supplies, even as the global political situation became more fluid. Dealers expect the rupee to stabilise at the current level, now that the market is aware of the RBI's resolve to support the rupee and prevent any further excessive speculation. Dealers feel the exporters should now come in with their receivables, as the RBI has shown its determination to defend the rupee and bridge any demand-supply mismatches.