20th August, 2013 : Comments by Amar Ambani, Head of Research, India Infoline
Rupee recovers; indices pare losses
The cup of sorrows for Indian investors shows no sign of ebbing after both the government and foreign institutional investors left them in the lurch. The Nifty continued to flirt with 5400 as the rupee see-sawed with the dollar. This is the third straight day of losses for benchmark indices.
The Indian rupee continued to haunt traders on Dalal Street as it broke past the 64 per dollar mark in trade, plunging 98 paise to hit a record low of 64.11.
Earlier in the day, sentiment was hit badly after various brokerages tried to outbeat each other in downgrading India. This, despite, Moody’s reiterating its stable outlook of India’s Baa3 sovereign rating on Monday.
But as the day progressed, the benchmark indices erased most of their intra-day losses, tracking a strong recovery in the rupee on reports of an intervention by the Reserve Bank. On Monday, the rupee recorded its decade’s worst single-day fall against the dollar of 148 paise to close at 63.13.
This led to the Nifty barely managing to hold on to the 5,400 mark. The Sensex shut shop at 18,246, down 61 points, while the Nifty closed at 5,401, down 13 points over Monday’s close.
Auto, consumer durables, pharma and IT stocks lagged while metals, realty, banking and oil and gas stocks gained. Even midcap stocks remained under pressure, however, smallcap stocks bucked the negative trend.
IT stocks, which rode piggyback on the rupee’s gloom, was in for a rude shock with the latter’s appreciation. Commenting on the same, Amar Ambani, Head of Research at IIFL, said, “IT stocks corrected today after a strong 4-6 week rally. Overall, the IT space continues to be attractive considering the decent revenue traction from key markets like the US, sustained rupee weakness and improving management commentary. The export-oriented nature of their business also makes the IT space a safe haven given the current domestic macro-economic weakness.”
The advance-decline ratio favoured the bulls. On the Bombay Stock Exchange, 1,174 stocks advanced against 1,101 declines, while 125 stocks remained unchanged.
Volatility, as measured by India VIX, spiked another 6.5% to close at 27.23. It hit a day’s high of 27.43 and low of 24.86.
Tata Motors, ACC, HCL Technologies, BHEL, Sun Pharmaceutical, M&M, TCS and Asian Paints lost out while Sterlite Sesa, JP Associates, BPCL, Tata Steel, Cairn India, DLF, NMDC and IDFC gained.