Wednesday, August 21, 2013

Rupee crashes to record low of 64.55, Sensex sinks 340 points - NDTV

The BSE Sensex crashed over 660 points from the day's high on Wednesday as the Indian rupee hit yet another low against the U.S. dollar. The rupee broke past 64.50 to a new record low surpassing the previous lows of 64.11. (Read: Rupee sinks to 64.55 despite RBI measures)

The Sensex fell 340 points to close below the 18,000 levels for the first time since September, 2012. The 50-share Nifty managed to end just above the 5,300 mark, after falling 99 points.

The carnage in stock markets extended to a fourth straight day as blue chip stocks slumped on fears of foreign investor selling ahead of a U.S. Federal Reserve report that may give details of its stimulus policy.

Deven Choksey, managing director of local brokerage KR Choksey told NDTV that the rupee remains the larger cause of worry.

"It's total mayhem in markets... if 5,250 breaks down the next support will come at 5,000 levels," Hemant Kale of ZEST Capital told NDTV.

If we stay above 64, we could see a catastrophic fall in markets, Mr Kale added.

Markets have fallen despite steps taken by the government and the Reserve Bank took steps to support the beaten-down bond market on Tuesday. The RBI relaxed rules on mandatory bond holdings for banks, which would help protect lenders from large mark-to-market losses and said it would buy long-dated government bonds worth Rs 8,000 crore. (Read: Rupee support: RBI to buy bonds worth Rs. 8,000 crore)

The bond buying comes after a series of liquidity-tightening measures failed to support the rupee although these steps sent interest rates surging.

These measures gave boost to banking stocks and the Bank Nifty surged around 6 per cent in early trade. But the gains did not last and the benchmark managed to close just 0.5 per cent higher.

"There is a bit of panic in the currency. The announcements yesterday had an effect on the yield side and it would be unfair to expect gains in the currency on the back of those announcements. Markets should not react too much about these announcements," Arvind Narayanan of DBS Bank told NDTV.

Yield on the benchmark 10-year bond fell as much as 69 basis points to 8.21 per cent in morning trades. It was last trading at 8.41 per cent.

There is growing realisation that morning highs were a relief rally or a short term bounce, traders said.

"Overall, the environment in economy has to improve. If yields are not controlled and interest rates don't go down, there's little hope for markets going ahead," Mr Choksey said.

(With inputs from Reuters)
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