Sensex sheds 306 points; rupee weakens to 68.43

Indian shares dropped — with the key indexes declining for the sixth day in seven — as investors continued to assess companies’ quarterly earnings, with most results reported so far trailing analyst estimates. Sentiments were also dented by the Indian rupee’s fall.The benchmark Sensex Index fell 0.88% or 306.33 points to 34344.91, its lowest level since April 18, while the NSE Nifty 50 Index slid 1%. Since January, the Sensex has gained 0.5%.Tata Steel tumbled 6.2% to its lowest closing price since August 2017 as a deal to merge its European businesses with Thyssenkrupp fell under a cloud after a fund critical of the transaction was said to raise its stake in the German company. State Bank of India climbed 3.8% as investors believe the lender has capped bad loans.Net incomes at more than half the Nifty companies that have reported earnings so far have trailed estimates, with profits for January to March rising an average 13% from a year earlier compared with a 26% growth in the previous quarter.“The earnings season so far has demonstrated the importance of staying with quality stocks with decent cash flows and best of corporate governance,” said Purvesh Shelatkar, senior vice president at Centrum Broking. The NSE Volatility Index rose 4.1%.Meanwhile the rupee yesterday weakened to 18-month low against the US dollar after foreign institutional investors (FIIs) continued to sell in the local equity and debt markets following the global trend amid surging crude oil prices.The currency is now just 0.6% away from its all-time closing low of 68.825 which was hit on August 28, 2013. In intraday, the rupee hit a low of 68.8625 on November 29, 2016.The home currency ended at 68.43 against the US dollar — a level last seen on November 29, 2016, down 0.56% from its previous close of 68.04. The currency opened at 68.14 a dollar and touched a low of 68.46 a dollar.The partially convertible rupee has fallen over 6.4% so far this year, making it the worst-performing Asian currency. Since start of April, FIIs have sold a combined $4.5bn in local equity and debt, respectively. Year to date, they have bought 494.40mn in equity and sold $4bn in debt.“The recent depreciation of the INR can be attributed to FPI outflows from Indian markets — both equity and debt — over the past two months” said brokerage firm Nirmal Bang on May 23 report. The brokerage firm has increased its estimate for FY19 to 68.7 from 66 earlier, while for FY20 forecast stands at 71.5.Analyst expects that surge in crude oil could cause a major headwind for Indian markets in the general election year and may increase inflationary pressures and lower the chances of an interest rate cut by the Reserve Bank of India (RBI).The failing to form government in Karnataka by Bharatiya Janata Party, despite being single largest party, will put pressure on the government to ramp up spending to woo more rural voters. This may lead, analyst fears, to adopt more populist measures due to which government may not be able to stick its fiscal deficit target.The fiscal deficit target was breached in the 2018 fiscal year while goal for this year was widened to 3.3% of gross domestic product.The rupee is already under pressure due to external factors, such as rising US bond yields, geopolitical concerns and a trade war threat.Traders are awaiting release of the minutes of the Federal Reserve’s early-May policy meeting.The 10-year bond yield closed at 7.849% from its Tuesday’s close of 7.812%. Bond yields and prices move in opposite directions.