Rupee crosses 63, Sensex cautious after yesterday's massive sell-off

After a scary sell-off yesterday, Indian equity markets opened on a cautious note this morning ahead of the RBI monetary policy review today. RBI governor Raghuram Rajan has to wade through a sea of red in global markets as he deliberates and decides on the future course of action as far as the monetary policy is concerned. He has indicated a number of times that inflation remains a worry so there are no great expectations built into today’s policy meet. A status quo may pass off as peaceful.

Meanwhile,economic recovery in the West such as the US and Europe could lead to a flight of capital from emerging markets, raising financing costs for companies as the gap between economic growth rates narrows and investors begin to reassess their risk-and return benchmarks. Alsofearsof a likely taper of the monthly bond-purchase programme by the US Federal Reserve returned to grip investors on Monday.

[caption id=“attachment_1264215” align=“alignleft” width=“380”] Andrew Middleton/Flickr[/caption]

Investors world over are just coming to terms with the slowdown in China, weak emerging market currencies, high deficit in Japan and the worries on the impact of Fed tapering.

Asian markets are showing some recovery with Japan’s Nikkei and Hong Kong’s Hang Seng trading higher. South Korea’s Kospi index and China’s Shanghai have also clocked marginal gains. US markets ended in the red again with the Dow closing 41.23 points lower. The S&P 500 fell 8.73 points while the Nasdaq lost 44.56 points.

Meanwhile, the BSE Sensex opened flat, up22 points at 20736 while the Nifty opened points higher at 6145.

BSE realty index, among the worst hit yesterday, is up 1 percent; capital goods index is up 1 percent as well while the metals index up nearly 1 pct, auto index up 0.9 percent.

The rupee, however, crossed the 63 mark to open at 63.07 against the US dollar.

Even on Monday, the rupee was the worst performer on Monday among all emerging market currencies. The Indian currency had hit an intra-day low of 63.31 before closing at 63.10. Had the Reserve Bank of India (RBI) not intervened through sale of dollars in the market, the fall in the rupee on would have been much sharper due to selling by FIIs and high month-end dollar demand.

The Turkish lira remained volatile, dropping 0.7 percent to 2.2690 to the dollar in early Asian trade, though it kept some distance from the record low of 2.3900 hit on Monday. The lira, which has been battered by the corruption scandal that rocked Prime Minister Tayyip Erdogan’s government, rebounded from a record low after the central bank called an emergency meeting on Tuesday.

Globally, investors are now focusing on whether the central bank of Turkey, one of the epicentres of the latest rout in emerging markets, could salvage the lira at an emergency policy meeting later in the day.

Elsewhere, the South African rand hit five-year low while the Russian rouble hit an all-time low against the euro on Monday.

Results today: Ipca Labs, Jindal Steel, JSW Steel, Jyothy Lab, Maruti Suzuki, NTPC, Pidilite Inds and Sesa Sterlite will unveil their third quarter earnings today.

With inputs from Reuters