Stocks, Rupee On Downward Spiral As Investors Worried About India's Ability To Grow

07/05/2015 5:25 PM IST | Updated 15/07/2016 8:25 AM IST
Indian pedestrians watch the share prices ticker alongside a digital broadcast of Indian Finance Minister Arun Jaitley delivering his Budget speech at the Parliament in New Delhi, on a screen outside the Bombay Stock Exchange (BSE) in Mumbai on July 10, 2014. Jaitley set a fiscal deficit target for 2014 of 4.1 percent of GDP as he presented the new government's first budget, while promising cuts in the next few years. AFP PHOTO/ Indranil MUKHERJEE (Photo credit should read INDRANIL MUKHERJEE/AFP/Getty Images)

The BSE Sensex fell for the third straight session on Thursday, closing at its lowest level in near 6-1/2 months on continued selling by foreign investors due to worries over retrospective taxes and a delay in land acquisition bill.

The Sensex closed down 0.44 percent at 26,599.11, while the broader Nifty fell 0.49 percent to 8,057.30.

This comes after the Sensex lost 2.6 percent yesterday as global funds continued selling Indian stocks, amidst concerns over poor earnings. While some companies have posted results that matched or beat expectations in March, most did not. Overseas funds have been selling since April 22, and have sold $71 million worth of shares so far. Rising oil prices have contributed to the fall, as has the government's inability to pass the land acquisition bill.

“The earnings season has been lackluster, economic data hasn’t picked up as expected and rising oil prices don’t help India,” Adrian Mowat, the chief Asian and emerging-market equity strategist at JPMorgan Chase & Co. in Hong Kong, said in this interview. “Investors are reducing their overweight position in India and buying into other emerging markets.”

At the same time, the rupee, which had picked up after Narendra Modi's win last year, is now down to 2013 levels. As of 3.45 p.m., the rupee traded at 64.16 per dollar, the first time in almost two years that the Rs 64 level has been breached.

"I think the real reason is MAT, which has created a sort of fear in the minds of FIIs," said currency expert AV Rajwade.

This will reduce chances of a rate cut at the June 2 review meeting of the central bank. The currency was the best performing among developing nations in 2014, but higher capital outflows and lower confidence in the government's ability to reform have contributed to its fall.

The Sensex closed at its lowest level since Oct. 21, 2014, while the NSE index finished at its lowest level since Dec. 17, 2014.

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