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Sensex sinks 769 points as rupee breaches 62

Most analysts NDTV spoke to attributed Friday's plunge to the weakness in the rupee. The rupee hit a record low of 62.03 in early trade today surpassing the previous all-time low of 61.80 hit last week. The currency had closed at 61.43 on Wednesday.

The BSE Sensex plunged over 800 points on Friday tracking the rupee, which hit another record low of 62.03 and on fears that an early rollback of U.S. monetary stimulus would trigger a selloff by foreign investors.

The broader Nifty benchmark fell 4 per cent, the most in nearly two years, breaching the key 5,500 levels in intraday trade. The Sensex closed 769 points lower at 18,598, while the Nifty ended 234 points lower at 5,508. The rupee closed at 61.65 against the dollar, off the day's low.

Most analysts NDTV spoke to attributed Friday's plunge to the weakness in the rupee. The rupee's previous all-time low was 61.80, which it hit last week. The currency had closed at 61.43 on Wednesday.

The government and the Reserve Bank had unveiled several measures to stop the slide in the rupee on Wednesday, but these steps clearly failed to shore up the rupee.

On Thursday, Prime Minister Manmohan Singh promised in his Independence Day speech: "I believe that this phase of slow growth in India will not last long...we are working hard to remedy the situation." Finance Minister P Chidambaram said on Friday that the government was taking steps to stabilise the rupee and expressed confidence that it will find its correct level once other parameters are taken care of. He said the UPA government had taken a host of measures to boost the economy in the last nine years in the face of global recession.

But there seemed little reason for optimism on Friday and the Left's Sitaram Yechury said: "It is very clear that there is a serious current account deficit. This was bound to happen the way India has liberalized its imports. The people in the country should have the capacity to buy them. Foreign investment will not come here as there is no market here."

The BJP slammed the government for what it called its financial mismanagement. "This has never happened in Indian history... There is complete financial distress in the country...The Indian government must take urgent steps... I think the entire nation is waiting for Narendra Modi."

Gujarat Chief Minister Narendra Modi is expected to be named the BJP's candidate for the next general elections due by May 2014. In his Independence Day speech at a college in Bhuj yesterday, he tore into the Prime Minister over, among other things, the fall of the rupee, saying: "Mr Prime Minister...I want to ask you who is responsible for the way our rupee is getting devalued, the way it is heading towards crisis."

Traders were surprises by the intensity of Friday's selloff, which could be gauged by the fact that only one stock (Hero MoroCorp) closed in the green on the Sensex. The decline was led by banking stocks.

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