MUMBAI/NEW DELHI: After losing nearly 1,000 points during the last two sessions on weak economic sentiments, Sensex staged a smart recovery on Wednesday, followed by the dramatic course correction of rupee, as reports emerged about Prime Minister Narendra Modi gearing up to hold a review meeting to discuss urgent economic issues this weekend.
On September 8, The New Indian Express had reported that the Prime Minister will hold a meeting of his economic advisory council members, ministers from the Centre’s core committee and key officials from the Finance Ministry and NITI Aayog to discuss issues of urgent economic interest, including the falling rupee, increasing petrol and diesel prices and a larger current account deficit.
Sources in the Finance Ministry admitted that a lack of proper communication from the government and fragmented views from ministers have fuelled rumours regarding the economy and further dampened investors’ sentiments. In this context, a strong communication from the PM will help to allay investors’ fears, they said. “The government and the RBI will do everything to ensure that rupee does not slide to unreasonable levels. Today’s correction seems to reflect that realisation,” tweeted Economic Affairs Secretary Subhash Chandra Garg.
There was no fundamental rationale for the rupee to depreciate to levels seen till Tuesday, he said, adding, “It reflected overreaction of market operators.”The Indian rupee recovered from the depths of despair as it inched near 73-level against one US dollar and lifted market sentiments, which had turned bearish over weak economic sentiments. This, coupled with assurance from the government to address the market concerns, pulled out benchmark indices from a sea of red during early trade to greener shores. While the Sensex closed higher by 304.83 points at 37,717.96, Nifty 50 rose 82.40 points to close at 11,369.90.
The domestic unit collapsed to a lifetime low of 72.91 in the early trade, as crude oil prices surged towards $80 a barrel, coupled with foreign fund outflows. However, rupee soon found its footing with the government sending out much-needed signals. The Indian currency ended the session at 72.19, up 0.7 per cent from its previous close of 72.70, for its biggest single-day rise since May 25. After crashing to a lifetime low in early trade, leading to a massive buying, rupee rebounded by 69 paise to trade at 72.00 on suspected central bank intervention.
Till date, rupee weakened more than 11 per cent and continues to be Asia’s worst performing currency. Worse, its future remains fragile considering the volatility in oil prices, an emerging markets sell-off, widening current account deficit and threat of worsening balance of payments situation.
10-year bond yields down 5 points
The 10-year bond yields closed at 8.13 per cent, down 5 bps from the day’s high of 8.23 per cent. BSE MidCap gained 0.52 per cent, whereas SmallCap fell 0.27 per cent. Power Grid, ITC, Sun Pharma and Adani Ports were among the top gainers, whereas Axis Bank, Tata Motors, HPCL and ICICI Bank were among the major losers.