Reuters/Mumbai
India’s NSE index fell 1.5% yesterday, marking its biggest single-day fall in nearly 3-1/2 weeks as blue-chips such as Reliance Industries slumped tracking weaker global markets ahead of US jobs data later in the session.
While encouraging for the global economy at large, strong US employment data would strengthen the case for an early interest rate hike by the Fed, whose monetary largesse has helped fuel a 45% rally in global stocks over the past two years.
This caution was magnified in India after overseas investors sold shares worth Rs16.54bn ($273.2mn) on Thursday, their biggest single-day selling since July 2, according to provisional exchange data.
Markets virtually ignored a private survey yesterday showing factory activity expanded at its fastest pace in 17 months in July and data late on Thursday showing annual infrastructure sector growth hit a nine-month high in June.
Caution ahead of the Reserve Bank of India’s policy review on Tuesday, its first since the new government’s budget, where it is expected to leave its key interest rate unchanged, weighed as well.
“Global risk is weighing but India remains on an uptrend.
Expectations for at least a dovish stance by RBI have also grown, so buy on dips,” said Deven Choksey, managing director at K R Choksey Securities.
The broader NSE index closed 1.54%, or 118.70 points, lower at 7,602.60 after going below the psychologically important 7,600 level during the day.
The benchmark BSE index lost 1.6%, or 414.13 points, to end at 25,480.84.
Rupee dips to 61.18 against dollar
The rupee posted its biggest weekly fall since record low levels in August last year as the rally in the dollar in global markets spurred banks to buy the US currency for corporate clients, prompting mild intervention by the central bank.
The falls were especially pronounced yesterday, when the partially convertible rupee almost breached the 61.19 level, last seen on April 23, tracking broader falls in Asian currencies. It ended down with its biggest daily decline since January 24.
Whether the dollar sustains those gains depends on US monthly jobs data due later in the day. Strong US job data would strengthen the case for an early interest rate increase by the Federal Reserve and could benefit the dollar at the expense of emerging currencies such as the rupee.
The rupee ended at 61.18/19 per dollar against Thursday close of 60.55/56. The local currency fell 1.02% on the day, its biggest fall since January 24, during a period when emerging markets were gripped by risk aversion over China’s economy.
For the week, the rupee fell 1.8%, its biggest weekly fall since late August last year.