Mumbai: The market fell for the third consecutive session, but closed off day's low on Tuesday on short covering in most beaten down stocks banks and FMCG. The sharp recovery in rupee from its record low of 64.11 per dollar also helped the market recoup some of its losses.
The BSE Sensex crashed 336.54 points intraday (to touch day's low of 17970.98) on top of 1060 points fall in previous two sessions, but it trimmed losses amid choppy trade to close at 18246.04, down 61.48 points.
The NSE Nifty that touched an intraday low of 5306.35 also managed to close above 5400 level at 5401.45, down 13.30 points from previous close. The weakness in domestic currency remained the core reason for the downtrend in equity benchmarks and downgrade India as it will boost the country's oil import bill that will push up the current account deficit.
JP Morgan downgraded India to neutral from overweight this morning citing the rupee weakness as the primary reason for the downgrade. The brokerage house says India will continue to underperform unless rupee stabilises. Aditya Narain of Citigroup cut his 2013-end Sensex target to 18,900 from 20,800.
"India is now swamped with uncertainty of monetary policy, economic and investment revival, earnings, flows and elections. That is smashing the market currently, but more fundamentally it pushes out any economic, earnings or valuation based revival," Narain explained.
Indian rupee touched an all-time low of 64.11 in early trade, but it recovered later on. It was down by 41 paise to 63.54 as against previous day's close of 63.13 per dollar.
Arvind Narayanan, ED and head of Sales, Treasury & Markets, DBS Bank believes the rupee may see some respite in the near-term though the trend for the Indian currency remains bearish for now.
He says the main reason for rupee's sharp crash to 64 against the dollar can be attributed to the US bond yields, which are at a healthy 3 per cent, signalling a recovery in that economy. "If you have strong data coming from the US, emerging markets and especially those with current account deficits like India would be in a spot of bother," he adds.
Even the bond yields recovered quite sharply; 7.16 per cent 2023, 10-year bond yield fell 2.6 per cent or 24 bps to 8.98 per cent after hitting 5-year high of 9.43 per cent intraday.
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