FIIs pull out most in a day in 3 months

Mumbai: The stock market extended its losses on Tuesday, rattled by the continued slump in rupee to fresh record lows and surge in oil prices. Foreign institutions intensified selling of Indian stocks, pulling out Rs 1,454 crore — their highest daily outflow in over three months — as money moved from riskier emerging markets to safehaven assets like the dollar.

Sensex fell 509.04 points, or 1.34 per cent, to 37,413.13 while Nifty dropped 150.60 points, or 1.32 per cent, to end at 11,287.50. Both indices have fallen 2.5 per cent in the last two days with Sensex alone sliding around 950 points. The index has lost about 1,200 points since September 1.

The rupee slid to 72.74 a dollar — an all-time low — on Tuesday amid renewed global trade war worries. It ended the day at 72.70, a fall of 0.35 per cent.


“Investors are now seeking safety of safe-haven assets amid trade-war worries leading to a stronger dollar,” said Piyush Wadhwa, head of rates trading at IDFC Bank. “Equity market weakness is also fuelling fear of foreign fund outflows, which in turn, will keep the local unit under pressure,” he said.

Worries about the impact of the weakening rupee and higher crude prices on the economy’s health have intensified with current account deficit (CAD) widening to a four-quarter high.

“Foreign investors are understandably nervous about India’s weak macro with further risks to CAD and gross fiscal deficit from higher crude prices and continued softness in GST collections,” said Sanjeev Prasad, co-head, Kotak Institutional Equities. Oil prices rose on Tuesday after US sanctions squeezed exports by Iran — a major oil producer. Brent crude was at $77.87 a barrel.

Concerns over the country’s finances also showed in the bond market with the yield on benchmark government security rising to 8.19 per cent, its highest level since November 2014. Elsewhere in Asia, shares extended losses to the ninth straight session. China’s Shanghai Composite dipped 0.2 per cent, Hong Kong’s Hang Seng fell 0.7 per cent and South Korea’s Kospi fell 0.2 per cent.

At home, the near-term prospects of the stock market will depend on the direction of the rupee. But, analysts are not sure whether rupee’s weakness has run its course.

“The worst may be over for the rupee if global macro factors and oil prices were to stabilise,” said Prasad. However, risks to both global macro from possible escalation in China-US trade relations and domestic macro from higher crude prices due to possible hard US sanctions against Iran oil exports remain.”

BSE’s mid- and small-cap indices fell almost 1.4 per cent each. Losers outnumbered gainers 1872:845, a sign that the sell-off was widespread. Some fund managers are far more sanguine about the market’s prospects claiming an earnings revival is in the offing. “The situation is not that bad as projected and not out of control so far,” said Gopal Agrawal, chief investment officer, DSP Mutual Fund.

“Earnings growth rate is set to pick up pace and if some of the macro parameters comes under control, market will bounce back.”