Market Mayhem : Biggest Sensex Plunge in 4 Years

• Rupee touches all-time low of Rs 62.03/$, closes at Rs 61.65
• Gold up Rs 1,310/10gm

RBI’s panic moves scare foreign investors away

I think this is time for calm. This is time for reflection. And let's see what happens next week - Chidambaram

Mumbai (Agencies): Markets snapped after a four-day smart rally with bears swinging back to action and market fell like nine pins. Besides global cues, rupee weakness too contributed to the steep fall. On Friday, the benchmark index Sensex sank 769.14 points or 3.97 per cent down to close at 18,598.18 as the rupee fell to a record low of 62 per dollar amid heavy selling by foreign funds. The Nifty closed the trade at 234.45 points or 4.08 per cent down at 5,507.85 points. India VIX rose 26 per cent, which indicates rise in volatility in the market. The crash is one of the worst in the last four years, in the intra-day trade the Sensex fell up to 800 points, after RBI’s moves to tighten capital outflows and curb gold import but failed to prop up the currency.

The market was also worried on fears of likely tapering of quantitative easing. Besides, the fear among foreign investors is that recent RBI measures may bring capital control measures back in a much bigger way. However, the government clarified that it is not considering any capital control measures. Analysts say that the government, despite measures to contain rupee fall, failed to quickly attract foreign inflows. Further, they say the rating agencies is closely watching the Indian situation and there is always a threat of ratings downgrade.

Stocks of banks, consumer durables, oil and gas, metal, capital goods, automobile, fast moving consumer goods (FMCG) and public sector undertakings (PSU) saw heavy selling. Broader market was pathetic with advance decline ratio placed at about 1:3.75 while only 3 stocks closed in the green among Nifty stocks.

Also, the massive selling pressure in the stock markets was due to the high demand for the US currency. Recent industrial and employment data from the US and some major European economies like France and Germany has shown significant improvement, making these markets more attractive than India, a reason for market fall. On rupee front, the partially convertible rupee slipped to a new record low of 62.03 against the dollar at inter-bank foreign exchange market here, surpassing its previous record low of 61.80 of August 6.

Gold surged by 1,310, the biggest in two years, to Rs 31,000 per 10 gram level in Delhi, on strong demand from stockists ahead of festival season. However, RBI prohibited inward shipment of gold coins, medallions and dores without licence.