Share markets in India continued to trade in the red during closing hours and ended their trading session marginally lower. Sectoral indices traded on a mixed note with stocks in the power sector and oil & gas sector witnessing most of the selling pressure.
At the closing bell, the BSE Sensex stood lower by 60 points (down 0.2%) and the NSE Nifty closed down by 25 points (down 0.2%). The BSE Mid Cap index ended the day down 0.5%, while the BSE Small Cap index ended the day down 0.3%.
The rupee was trading at 73.04 against the US$.
Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 2.1% and the Shanghai Composite was down by 0.4%. The Nikkei 225 was down 1.6%.
Ankit Shah offers an interesting observation around the falling stock markets.
The below chart shows the difference between the performance of the Sensex and the Dollex 30 index (Sensex in US dollar terms).
Dollex-30 Is Down 10% in 2018
You can see how the trend between the Sensex and Dollex-30 diverged since February 2018.
The Dollex-30 index has declined 10% in 2018 so far.
No wonder that foreign investors have been dumping Indian stocks. Since April 2018, foreign investors have sold equities worth Rs 56,550 crores. What is worth noting is that Rs 27,623 crores worth of equities were sold in the month of October alone.
Stocks such as Cipla, Fortis Healthcare, GAIL, PNB Housing, Power Grid, Inox Wind, Natco Pharma, and Tata Jewels were in focus today as these companies announced their quarterly results today.
You can read our recently released Q2FY19 result analysis of the following companies: Asian Paints, TVS Motors, Wipro, Ambuja Cement, HDFC Bank, Infosys and more.
In the news from currency markets, the Indian rupee is witnessing selling pressure today. The domestic unit weakened against the US dollar after tracking losses in Asian currencies market amid speculation about a US-China trade deal.
Note that the rupee has declined around 12% since the start of this year.
A fall in the rupee has many repercussions for the Indian economy. It means importers buying goods and services at a higher rate than earlier. This doesn't bode well for a developing economy that relies heavily on imports.
Also, India imports most of its oil requirements. So, a fall in rupee leads to a consequent rise in the import bill. The depreciation of the rupee will also add to crude oil's rising cost.
On the corporate side, companies who have taken foreign loans from abroad will be impacted. The repayment obligations in terms of principal and interest will rise, leading to a dent in the cash flows and financials.
Further, companies who import a majority of their raw material requirements will get impacted provided they have not hedged their foreign currency exposure.
Looking at the brighter side, rupee depreciation brings a cheer on the exports front.
A depreciating rupee will provide a much-needed cushion to falling exports. However, a falling rupee will not be the only factor to boost exports. There are certain structural issues too which the government needs to address.
In the news from global financial markets, Bank of Japan (BOJ) Governor Haruhiko Kuroda ruled out the chance of a near-term interest rate hike. As per him, raising interest rates now would only add to strains for financial institutions by threatening to derail Japan's economic recovery.
While Kuroda said the BOJ would be more mindful of the rising cost of the prolonged stimulus, he saw no reason now to follow in the footsteps of its US counterpart in normalizing policy with inflation still distant from its 2% target.
He also said that Japan's regional banks could see their business environment worsen further five to 10 years ahead, as they run out of assets to sell to make up for shrinking profits from core lending operations.
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