27th August, 2013 : Comments by Amar Ambani, Head of Research, India Infoline
Turbulent Tuesday…Rupee, Food bill sink Nifty below 5300
There was absolute ruckus on the street as the Nifty closed near its lowest level since September 6, 2012 even as the BankNifty ended at its lowest level since January 11 2012.
The main reasons attributed are the rupee’s continued weakness and the Lok Sabha approval of nearly US$20bn plan to provide cheap grains to the poor. Heightened concerns are that India’s fiscal deficit will balloon further.
Commenting on the same, Amar Ambani Head of Research at IIFL said, “The food security programme motivated by populist drives is a serious threat to the fiscal deficit. Already, the economy is reeling under the impact of a cut in Plan expenditure to contain fiscal deficit to the figure of the previous budget. Now any spending on food close to the election time will make matters worse for a fiscal deficit that is already hard to achieve.”
Selling pressure accentuated fiercely after the rupee tumbled to breach the 66-mark against the US dollar hitting fresh all time low.
If that was not enough, Fitch Ratings also has warned of a downgrade if the country is unable to meet fiscal deficit target. It said reining in the fiscal deficit at 4.8% of GDP would be a difficult task.
The BSE Bankex, capital goods and power index all fell over 4.5% each. Among the other major laggards were, BSE realty, metals, FMCG, auto and consumer durables index
The BSE Small-Cap and BSE Mid- Cap index also fell 2% each.
The BSE IT index was the only gainer among the sectoral indices on the Bombay Stock Exchange on expectations of higher revenue following stronger dollar.
Finally, the BSE Sensex closed at 17968 down 590 points, while Nifty closed at 5,287 down 189 points over the previous close.
Barring the index heavyweights like Infosys, Dr Reddy’s Lab and HCL Tech all the other constituents in the Nifty ended in the red. Top losers were, IDFC, BHEL, IndusInd Bank, JP Associates, HDFC Bank, HDFC, Axis Bank and Reliance Infra.
The advance-decline ratio favoured the bears. On the BSE, 1536 stocks declined against 721 advancing stocks, while 138 remained unchanged.
The INDIA VIX shot up 11% at 29.42. It hit a day’s high of 30.04 and low of 25.97.
Socks in News
IDFC shares hit its four-year lows in the day’s trade and closed at Rs.79.45 down a whopping 16.15% or Rs.5.30 from its previous close as the overall foreign shareholding limit in the company has been reduced to 54% from 74%.
Reliance Communications closed at Rs.111.55 down 4.90 or 4.21%. The company concluded its annual general meeting on Tuesday. Chairman Anil D Ambani’s while speaking at the AGM said Reliance Communications is seeing strong growth momentum in data consumption.
Maruti Suzuki closed at Rs. 1,265 down by Rs.43.15 or 3.30% after the company said that it will miss the target of commissioning its Gujarat plant due to the ongoing slowdown in Indian automobile market.
CRISIL shares slipped by Rs.10.95 or 0.97% after the company announced that plans to sell its 49% stake in India Index Services & Products Limited (IISL), its Joint Venture with National Stock Exchange of India Limited (NSE).