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Deteriorating balance of payments and weak cues from the European region took their toll on the rupee and the stock market on Friday.
The rupee recovered some losses to settle at 53.47/48 against the dollar after hitting an intra-day low of 53.95. For the fifth successive week, the rupee has been under pressure and is close to its all-time low of 54.3050 seen in December 2011.
The BSE Sensex tanked 1.8 per cent to close below 17,000, at 16,831, for the first time since January 30. The S&P CNX Nifty slumped 1.96 per cent to close at 5,086.85.
According to Mr Alex K Mathews, Head, Technical and Derivatives Research, Geojit BNP Paribas Financial Services, “During the day, we had news reports that the Government is planning to review the DTAA (Double Taxation Avoidance Agreement) with Mauritius to raise revenues, which poured more fuel on the already slipping markets.”
Markets are keeping a close watch on the GAAR (General Anti Avoidance Rule) notification, corporate results and the foreign exchange reserves position, he added.
The Finance Minister, Mr Pranab Mukherjee, on Friday flagged the volatility in global commodity prices for the deteriorating balance of payment situation in the country which, in turn, is a major reason for the stress on the rupee. The landed cost of crude oil has already gone up sharply, leaving oil marketing companies in a tight spot.
Ever since Standard & Poor's downgraded India's sovereign outlook from stable to negative, market-men have lost confidence in India, said analysts.
Experts say the Nifty breaching the 200-day moving average is technically significant.
A drop below that level has the potential to trigger a fresh sell-off.
The weak opening of European markets aggravated the decline in the Indian bourses.
Though the market-men have attributed Friday's fall to FII selling, data posted by the exchanges after market hours show a different picture. Foreign investors, in fact, were net buyers for about Rs 428 crore. On the other hand, domestic institutions were net sellers to the extent Rs 280 crore.
Except the BSE Healthcare index, all the other sectoral indices closed in the red. Even the broader indices, such as BSE Mid-cap, BSE Small-cap and BSE-500, ended deep in the red. The BSE Capital Goods and BSE Bankex were the worst performers.
Volatility index jumps
The NSE Volatility Index jumped 9.7 per cent to 21.12, which again signals a negative outlook for the benchmarks.
The adverse market conditions also forced Samvardhana Motherson Finance, which planned to raise about Rs 1,665 crore, to defer its public issue. MCX, which got a huge response for its public issue in February, slipped below its offer price.
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