Sensex Dives Over 500 Points As Steps To Lift Rupee Fail To Cheer Street

Stock markets registered sharp losses on Monday, with the BSE Sensex ending 505 points lower against its previous close. While the BSE benchmark index Sensex settled at 37,585, the NSE Nifty plunged 137 points to end at 11,377. The sharp losses in the markets came after the announcement of steps by the government to stem the steep decline in the rupee amid a weak trend in other Asian markets. Analysts said continued weakness in the rupee along with concerns on the US-China trade war front hurt the markets. Banking, financial services, FMCG, energy and pharma shares led the decline in domestic equity markets.

Overall market breadth favoured losses, with 796 stocks closing higher on the NSE against 957 decliners. Top laggards on the 50-scrip Nifty included Reliance Industries, Bajaj Finance, Bajaj Finserv, HDFC, Tata Motors and Sun Pharma, closing around 2-3 per cent lower.

The Nifty Bank - a sectoral index on the NSE comprising banking stocks - finished 1.3 per cent lower. SBI, HDFC Bank, Axis Bank and Yes Bank finished 1-2 per cent lower.

The government late on Friday said it would take measures to cut down "non-necessary" imports, ease overseas borrowing norms for the manufacturing sector and relax rules around banks raising masala bonds, or rupee-denominated overseas bonds.

Analysts said the steps announced by the government didn't meet Street expectations.

"The rally witnessed in the past two sessions was a pullback rally based on expectation of government action... Besides, the global trade war is continuing and global currency weakening," AK Prabhakar, head of research at IDBI Capital, told NDTV.

The Sensex had Nifty had registered strong gains in the past two sessions supported by strong buying across the sectors. However, for the last week, the Sensex had declined 299 points and the Nifty shed 73.9 points.

Mr Prabhakar said he sees more correction going forward and advises caution at higher levels.

Meanwhile, the rupee shed more than 1 per cent to 72.70 per dollar on Monday. At these levels, the rupee continues to be the worst performing Asian currency, with a year-to-date depreciation of around 13 per cent against the greenback.

"There were expectations that something substantial will be planned to hold the rupee, but the measures the government had in hand were limited and a little long term in nature. So they will take their own time to have an impact," news agency Reuters cited Naveen Kulkarni, head of research at Reliance Securities, as saying.

Pharma stocks declined, with the NSE Pharma index closing 1.4 per cent lower. Sun Pharma, Piramal Enterprises, Lupin and Glenmark finished between 1.7 per cent and 3 per cent lower. Rupee depreciation boosts profitability of exporters such as pharma companies.

"The news of possibility of further escalation of trade war between the US and China didn't go well with the markets... Markets are currently dancing to the global tunes and we do not see this changing any time soon," said Jayant Manglik, president, Religare Broking.

Equities in most Asian markets slipped on fresh concerns on the US-China trade war front, with MSCI's broadest index of Asia-Pacific shares outside Japan snapping three straight sessions of gains with a loss of 1.2 per cent. The losses came amid reports that the US could announce a new round of tariffs on Chinese imports later in the day, setting the stage for possible reprisals by Beijing.

Buying by institutional investors on Friday also failed to bring cheer to the Street. Net purchases of equities by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) stood at Rs 1,090.56 crore and Rs 115.14 crore respectively, provisional data from the NSE showed. (With agency inputs)