Money Matters - Simplified

Stock market news : Gold rush, BSE Sensex and rupee free fall staggers all

It’s time to go sparkly people; Gold price is surging ahead fast! Now for some ‘bad” news the Rupee and BSE Sensex showed a sharp free fall, that has shaken the floor from beneath the domestic markets

BSE Sensex fall

The Nifty and the S&P BSE Sensex fell about 4 % on Friday. The gold surging upwards, the Rupee and the benchmark Sensex free fall is haunting the investors at the moment as the biggest single-day drop of two years has been recorded by the analysts. Will the foreign selling be effected?

Well, even a top bracket runner like the HDFC bank is scared that the tightening of US stimulus and this triple whammy might shake the markets! This will surely result in an account deficit that can stun the Government into some action. We just hope the action is not the reduction of the exchange-rate volatility and the throwing back of the capital control regime!

Rise in Gold

The only thing that is looking up at the moment is the Gold gain. Gold had shown the best surge in two years confirm the analysts. We have one scary thought the current trend of the Sensex and rupee fall may not be very welcome as it will lead to the improving of the US economy and hurt the investor sentiment in the domestic scenario.

Investors have always relied on their Gold investments but this time Gold price shot up by almost Rs. 1310. The data shows that 10 grams of Gold is available at Rs 31,000 in Delhi. The Sensex shows a fall of 769.41 points (3.97 per cent) to 18,598.18. This down fall has resulted in the investors losing more than Rs 2 lakh crore. The rupee had fallen to 62.03 and then closed at 61.65. This is the first time that the rupee has creeped down to an all time low of 62.

Nagji K Rita, Chairman & MD of Inventure Growth and Securities states "Weak international cues and rising dollar-rupee rates triggered selling in the Indian equity market.” The expert further commented “The rising bullion is now seen by many as a safer bet to park funds. And such a change in sentiment adds further selling pressure on equities as an asset class."

RBI’s verdict

The RBI geared into action at this fall and decided to take some stern measures to reduce the outflow of the foreign currency. It has announced that there will be restrictions on the Indian firms who had decided to spread business overseas by investing abroad. So will the outwards remittances by the Indians be curbed? Definitely proposes the RBI! The agitated investors needed to be calmed and so the Government along with the RBI stated that the capital control regime will not be exercised.

Pleading the investors to pay no heed to the data provided by the US authorities, Finance Minister P Chidambaram gave his verdict "When calm is restored in the market, people will begin to understand India market indicators must basically reflect Indian market conditions. They should not be so sensitive to data coming out of the US.”