Weekly Wrap: Sensex Snaps Six-Week Winning Streak As Rupee Extends Slide
Indian equity benchmarks snapped their longest stretch of weekly gains since January after the rupee extended decline to a fresh low, raising concerns over economic and earnings growth outlook.
The S&P BSE Sensex fell 0.66 percent to 38,390 and the NSE Nifty 50 index declined 0.8 percent to 11,589.
The rupee sliding to record lows weighed on the equity markets as a weakening currency is not only a concern for macros but earnings of a lot of import-related companies also get affected, Avinnash Gorakssakar of Joindre Capital told BloombergQuint over the phone.
Market participants will also track news on the U.S.-China trade front as reports suggest that more items could come under restrictions, Gorakssakar said. He cautioned that as “we enter the run-up to Rajasthan and Madhya Pradesh elections, it will not be a one-sided affair for markets and there will be volatile times ahead”.
Hindustan Unilever was the top Nifty loser. The stock fell 7.94 percent, the most in over seven years, on account of profit-booking as it saw a significant re-rating after GST implementation, Gorakssakar said. A bout of panic selling in HUL is not expected, he said, as it is a large cash-generating company.
Seven of 11 sector gauges compiled by the National Stock Exchange ended lower, led by Nifty PSU Bank index’s 5.4 percent drop. The index fell the most since July as corporate lenders are getting traction and people are shifting from retail to corporate lenders, AK Prabhakar, head of research at IDBI Capital Markets, said.
The Nifty Pharma index rose for the fourth week in a row, tracking weakness in the rupee against the U.S. dollar.
The rupee declined for the second straight week to test a record low of 72.10 per dollar as weakness across emerging market currencies and rising oil prices dragged it down further. The local unit dropped as much as 1.11 percent to 72.10 before closing at 71.74, making it the worst Asian currency.
It’s likely to weaken further to 75-78 a dollar as past data show that the rupee has weakened one year ahead of general elections, like in 2013 and 2008, Prabhakar said. “We have a similar situation and this time there are multiple negative factors playing like emerging market currency crisis, rising crude oil and U.S.-China trade tensions.”