Equity markets preferred to take their own course on Thursday, ignoring currency movements.
Despite the rupee continuing its free-fall to hit a life-time low of 65.65 against the dollar, before ending the day at 64.60, Dalal Street marched ahead. Earlier in the morning, the domestic currency opened weaker at 64.85 against the previous close of 64.02 to a dollar.
However, both the benchmark indices — Sensex and Nifty — surged over two per cent on the back of short covering after the market entered the oversold region. This recovery was aided by a sharp rally in metals and oil and gas sector stocks. The BSE Sensex regained the 18,000-mark to close at 18,313, up 407 points, while the NSE index Nifty moved past the 5400-mark to close at 5,408, up 106 points.
Though other Asian markets remained under selling pressure on fears that the US Federal Reserve may scale back its QE measures later this year, European markets showed resilience, giving some much-needed support to Indian stocks.
Except realty, all sectoral indices closed in the green on the BSE. However, the metal sector was the clear outperformer and rallied the highest to close at 7,739, up 8.23 per cent on the back of China’s improved manufacturing data. This was followed by oil and gas index, which was up 3.57 per cent.
Anindya Banerjee of Kotak Securities said: “A deeply oversold Indian equities market and uptick in the European bourses provided the uplift to Indian stocks. The weakness in the rupee, which touched a fresh life-time low against the dollar at 65.65 did not have much impact on the equity markets, beyond intra-day volatility.”
“Heavy dollar demand from importers and persistent capital outflows due to concerns on funding of the current account deficit weighed heavily on the Indian unit,” said a dealer with a nationalised bank. Foreign institutional investors offloaded Rs 1,277.64 crore worth shares on the exchanges, Thursday data revealed.
The rupee has fallen nearly 20 per cent since May and about 9 per cent in August.
Sugandha Sachdeva, Assistant Vice-President, Currency Research, Religare Securities, said, “The capital control measures taken by the RBI further heightened the fears of uncertainty in the forex market. Moreover, increasing gold imports are creating more fears of widening the current account deficit.”