Rupee Near Record Low; Sensex Down 50%

123jump.com Staff
08 Oct, 2008
New York City

Rupee in Mumbai trading fell near five-year low and is likely to trade below record set in June of 2002. Rising trade and current account deficit and lack of interest from foreign investors has battered stocks and rupee. Sensex index dropped 3% and has lost nerly 50% from the peak in January.

[R]10:00AM New York, 7:30 PM Mumbai – Global recession fears, rising current account deficit and falling rupee unnerves investors. Sensex falls 3% and down 50% from the peak in January.][/R]

Market Sentiment

In Mumbai, the BSE 30-share Sensex declined 3.14% or 366.88 to 11,328.36, and the CNX Nifty dipped 2.03% or 73.25 to 3,533.35. Of the stocks traded on the BSE 441 rose, 2,165 declined, and 46 were unchanged.

For the year the Sensex index is down 50% from the high in January and for the year has declined 44%.

Weak Rupee

Rupee fell to another low on the worries that foreign investors will repatriate funds and sell more stocks. In the interbank dealing on various platforms, rupee dropped as low 48.77 before recovering to a close of 48.00 against a dollar, a decline of 0.2%. The rupee keeps inching to the record low of 49.07 in June 2002 and is likely to surpass and trade as low as 49.50 by the end of the fiscal year. According to 123jump.com estimate, the oil import bill is likely to reach $104 billion and trade deficit of $115 billion and foreign investors are likely to withdraw more than $11 billion in the current calendar year.

Trading Statistics

Daily turnover on the BSE stood at 5,085 crore rupees from 4,741.54 rupees yesterday.

Ranbaxy Laboratories advanced 9% to 279.25 rupees on reports the US Department of Justice has withdrawn a motion against the drug maker for allegedly bringing adulterated and misbranded medications into the United States.

U.S. Loan Losses to Rise $1.4 trillion

The International Monetary Fund reported on its Web site yesterday in the Global Financial Stability Report (GFSR) that there was need for coherent and decisive interventions to stem the current deleveraging from being ""disorderly and costly to the real economy"".

According to GFSR, the losses on the U.S. mortgage securities are expected to increase to $1.4 trillion from an earlier estimate in April of $945 billion.

The report prescribes a three-part approach to stave off disorderly deleveraging through the government purchase of illiquid and impaired assets from lenders, injecting capital into viable institutions that are struggling and rescuing dysfunctional funding markets.

The Fund projects that financial institutions need to raise $675 billion, but however noted that the interbank lending has seized.

The GFSR estimates that credit growth in the United States, the euro area, and the United Kingdom will ease to near zero over the next year before regaining in 2010.

Jaime Caruana, Director of IMF''s Monetary and Capital Markets Department said, ""A comprehensive approach, if consistent among countries, should be sufficient to restore confidence and proper functioning of markets and avert a more protracted downturn in the global economy.""

European Central Banks Slash Rates

The Bank of England reported on its Web site that the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank will reduce its key interest rates.

The Bank of England Monetary Policy Committee today elected to slash its bank rate on commercial bank reserves to 4.5%.

Gainers & Losers

Stocks in India fell sharply in the morning session on fears that the global economy will slip into a recession. However stocks recovered in late afternoon trade after European central banks lowered key rates.

Tata Power Company rose 6% to 813.90 rupees, DLF increased 3.66% to 314 rupees, Reliance Communications advanced 2.95% to 309 rupees, and Mahindra & Mahindra gained 2.75% to 486 rupees.

Maruti Suzuki India increased 3.13% to 692 rupees and Tata Motors slipped 5.27% to 299.90 rupees.

Reliance Industries declined 1.54% to 1,649.60 rupees despite news that the company will commission a new 580,000 barrels per day refinery by the end of November 2008 from an earlier target of December 2008 deadline.

Jaiprakash Associates dropped 9.91% to 90.95 rupees, Wipro plunged 7.91% to 282.35 rupees, Sterlite Industries shed 6.95% to 292.55 rupees, ICICI Bank tumbled 6.53% to 453.50 rupees and the State Bank of India declined 6.1% to 1,322.15 rupees.

Consumer durables stocks fell. Videocon Industries declined 10.04% to 160 rupees, Titan Industries shed 7.49% to 890.90 rupees and Blue Star lost 4.29% to 256.45 rupees.

ITC plummeted 5.13% to 165.60 rupees, Hindustan Unilever plunged 4.44% to 238.05 rupees and United Spirits tumbled 17.52% to 619.55 rupees.

Infosys Technologies declined 3.81% to 1,254.35 rupees ahead of its quarterly earnings report.

Tata Consultancy Services fell 5.07% to 546.60 rupees after announcing today that it will acquire Citigroup Global Services for $505 million and provide business outsourcing services to Citi for $2.5 billion over a period of 9.5 years.

Company News

Reuters News reported that ICSA India Ltd said today it has assigned 1.75 million shares to Goldman Sachs Asia Finance upon conversion of warrants.

The shares constituted about 3.97% of the company''s equity and priced at 227 rupees a share.