Nifty crashes below 5,550; Banks, realty stocks plunge

iifl6th August, 2013 : Comments by Amar Ambani, Head of Research, India Infoline 

The weakening currency led to a bloodbath on D-Street as the Sensex closed at its lowest level since June 26 while the Nifty fell below levels last seen on April 12.

On a day when the government appointed Raghuram Rajan, Chief Economic Adviser to the Finance Ministry as new Reserve Bank Governor for a three-year period, the rupee dropped to an all-time record low of 61.80 per dollar on the back of fresh dollar demand from banks and importers.

Raghuram Rajan will replace Duvvuri Subbarao, whose tenure ends on September 4 after five years.

The Bank Nifty hit its lowest level since June 5, 2012.

The selling pressure was so intense that not a single sectoral index ended in the green. Interest rate sensitive stocks like banking and real estate led the decline, falling 4.6% and 4.1%, respectively. The other major laggards were consumer durables, metals, power and oil and gas stocks. Even midcap and small-cap stocks witnessed heavy offloading.

Sentiment was hit after a Wisconsin-based IT professional filed a lawsuit against Infosys, alleging that the IT bellwether discriminates against US job applicants in favour of South Asians. The stock slipped sharply from the day’s high to shut shop at Rs. 2,987, down 1%.

The Sensex closed at 18,733, down 449 points, while the Nifty shut shop at 5,542, down 143 points over Monday’s close.

On the earnings front, Tata Motors is expected to declare its Q1 FY14 results on Wednesday. Amar Ambani, Head of Research at IIFL, sees Tata Motors Q1 FY14 sales rising 9.9% year-on-year at Rs. 475.94bn. He expects profit after tax of India’s largest commercial vehicle manufacturer to fall 5.3% YoY at Rs. 21.92bn.

The advance-decline ratio favoured the bears. On the Bombay Stock Exchange, 1,599 stocks declined against 655 advances, while 124 stocks remained unchanged.

Volatility, as measured by India VIX, shot up by 9% at 22.73. It hit a day’s high of 22.75 and low of 20.32.

Tata Power, Asian Paints, IndusInd Bank, BHEL, BPCL, UltraTech Cement, JP Associates, HDFC, Tata Steel, DLF, Sesa Goa and ICICI Bank lost out in trade today. From the Nifty, only Ambuja Cements, Tata Motors, PowerGrid and TCS ended in the green.