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Sensex Tumbles 286 Pts, Re Breaches 60-mark On Global Cues

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The Sensex tumbled by 286 points to end at 19,177.76 as rupee breaching the 60-mark and draft norms on banks' exposure to corporates with unhedged forex triggered all-round selling, amid weak global cues.

The 1.46 per cent fall in sensex saw investor wealth worth Rs 1.1 lakh crore get wiped out as over 1,500 stocks led by realty, metal, PSU, consumer durables and power closed down on the BSE. Overall 11 out of 13 sectoral indices closed with losses of up to 4.76 per cent while only BSE-FMCG and BSE-HC indices bucked the trend.

The falls also tracked global shares as signs of slowing Chinese growth and escalating political tensions in Portugal, one of the euro zone's crisis hot-spots, spooked investors.

The Sensex fell 1.47 per cent, or 286.06 points, to end at 19,177.76, falling for a second consecutive session.The Nifty fell 1.48 per cent, or 86.65 points, to end at 5,770.90, closing below the psychologically important 5,800 level.

The shares have been hit hard along with other emerging markets due to fears about an early end to US monetary stimulus and signs of a weakening Chinese economy.

Foreign investors have sold nearly Rs 9820 crore in domestic shares since the start of June, as per regulatory data.

Traders said US non-farm payrolls data due this Friday and new earnings season that begins next week, with Infosys due to unveil its June-quarter results on July 12 were the near-term cues to watch.

RBI on 2 July proposed incremental provisioning and capital requirements for banks' exposure to corporates having unhedged forex exposure. SBI, ICICI Bank and HDFC Bank scrips saw pressure. Hindalco, Sterlite Ind and Tata Steel from metal pack ended 3-4 percent down on China growth fears.

Fall in the rupee below 60-mark, slowdown in country's services sector activity in June, rising bad loans and capital outflows also hit the market sentiment, said traders.

"Rupee and global cues created concerns around flows and recovery but we will be buyers on select basis," said Dipen Shah, head of Private Client Group Research, Kotak Securities.

Govt Expected To Unveil Reforms Soon
India's current account deficit reached a record high of 4.8 per cent of gross domestic product in the fiscal year ended in March, and a weak rupee would aggravate concerns about funding.

The government is expected to soon unveil measures such as opening up more sectors for foreign investment in a bid to attract flows.

"The rupee weakness is more a function of the dollar weakening globally. The trend remains for the local currency to weaken. I do not rule out 60.80-61 levels in the near term unless some big bang reforms come," said Satyajit Kanjilal, chief executive at ForexServe.

The partially convertible rupee closed at 60.215/225, compared with its previous close of 59.66/67. The currency is not far from a record low of 60.76 hit last week.

The Reserve Bank of India (RBI) has not been seen to be intervening heavily during the rupee's fall, instead choosing to try to curb speculation by administrative measures.

Global Meltdown
Asian stocks ended lower as concerns about growth in China's services sector added to selling pressure, amid investors adopting a cautious stance ahead of US data later this week. Key benchmark indices in China, Hong Kong, South Korea, Taiwan, Singapore and Japan fell by 0.31-2.48 per cent.

European stocks were trading sharply lower following crisis in Egypt, political turmoil in Portugal and downbeat data from China. Key indices in France, Germany and UK fell by 1.52 per cent to 1.56 per cent.

Kishor P Ostwal, CMD, CNI Research Ltd said: "The run up was so sharp that some correction was overdue post the end of June settlement. Street had gone long above 200 DMA of Nifty at 5820 therefore on global cues and weakening currency, market gave up some grounds. Nifty next support lies at 5700."

Talking about draft norms on forex exposure, brokerage Emkay Global said the guidelines suggest higher provisions / risk weights for exposure to corporates with unhedged foreign currency exposures (UFCE). "Since provisions/risk weights apply to total banking exposure, it will impact banks...".

Some Gain, Most Lose
Housing Development Finance Corp, where foreign investors hold almost three-fourth of the company, fell 2.5 per cent on outflow worries, while Reliance Industries ended 2.4 per cent lower.

NSE's banking index slumped 2.2 per cent after the RBI issued draft guidelines that would require lenders to make higher provisions and increase risk weights on exposure to companies that have unhedged foreign-currency exposure.

State Bank of India fell 4.6 per cent while Bank of Baroda ended 7.9 per cent lower.

Punjab National Bank slumped 5.1 per cent after Goldman Sachs downgraded the stock to "neutral" from "buy", citing a weak economic environment and the elevated stress asset levels at the lender.

Bajaj Auto Ltd slipped 1.2 per cent as the strike continued at its Chakan plant in Maharashtra, causing a production loss of about 20,000 motorcycles for June.

However, among stocks that gained, Tata Global Beverages rose 1.1 per cent after Morgan Stanley upgraded the stock to "overweight" from "equalweight", citing cheap valuation and a cyclical uptrend in its international business.