NEW DELHI: The uncertainty over oil prices due to the war-like situation in West Asia dragged the stock markets Tuesday with the Sensex falling 642.22 points and the Nifty dropping 185.9 points.
The day also saw foreign institutional investors pull out Rs 800 crore from Indian markets, displaying lack of confidence on the Indian bourses.
There was a broad-based selling in the markets, and among the 30 blue-chip stocks in the Sensex only Hindustan Unilever, Asian Paints and Infosys stayed in the green.
Global markets are now weighing on the reaction from the US and other oil-producing countries on how to fill the Saudi oil shortfall caused by a drone attack over the weekend on Saudi-Aramco facilities.
The spike in crude oil prices because of the attack and statements by the US, Iran and Saudi Arabia, saw Indian oil companies effect the largest hike in retail petrol and diesel prices since Budget day on July 5. Petrol prices rose 14 paise and diesel by 15 paise a litre in Delhi, standing at Rs 72.17 and Rs 65.58 a litre, respectively.
The rupee, too, fell sharply against the dollar for the second day running. Opening at 71.83 per dollar, the rupee fell to a low of 71.97. The fall was caused by the FII pullout.“Weaker currency tends to trigger FII outflow and vice-versa, too,” said Sanjay Bhattacahryya, former MD of SBI. This means the two are often a cause and effect of each other. It can also create a vicious circle, where investors will sell out because of global or domestic reasons causing a fall in the currency value, which could then result in further sales by foreign investors in India’s stock markets.
It is not just foreigners who are taking their money elsewhere. RBI data on the liberalised remittance scheme for resident Indians showed the highest ever monthly outflow of $1.69 billion in July.
Meanwhile, global crude oil prices began cooling Tuesday evening after some reports said Saudi would restore production sooner than expected.
Most companies are now hoping that the festive season would bring some cheer back to their revenue streams. Consumer mood surveys suggest people will loosen their purse strings during the upcoming festive season as they have in previous years.
Discounts and other enticing offers both online as well as in bricks-and-mortar retail space could lure customers open their wallets. “We are hopeful this year’s festive offers will provide a huge boost to buyers’ morale,” said S N Barman, vice president, Tata Motors.