BSE, NSE hit two-year lows

FIIs have withdrawn over $2 billion or Rs 10,000 cr in two months.

The funds exodus, spurred by growth concerns, high inflation and the ongoing euro zone crisis, caused the Sensex to touch an intraday low of 15,497 points before it recovered slightly to close out at 15,700 — 365.5 points or 2.3% down.

The 50-stock Nifty touched 4,647, also its lowest point since August 2009, before recovering to close at 4,706.5 down by 106 points or 2.2%.

“The high inflation would result in the interest rate hike by the Reserve Bank of India (RBI), impacting the growth of Indian companies,” said Alex Mathew, Research Head, Geojit BNP Paribas Financials. “This, combined with the falling Indian rupee, has caused the foreign investors to exit the equity market, resulting in the drop.”

The Indian Rupee is Asia’s worst performing currency in recent times, having lost over 16% in the last 12 months. Next on the list is Thailand’s baht, which has lost 3.2%.

Analysts also blame falling industrial growth figures for low investor confidence. FIIs are expected to continue exiting Indian equities till there is clarity on the Reserve Bank of India’s stand on the exchange rate. The euro zone crisis is also weighing on the FIIs.

“FIIs are putting money in dollar-denominated Asian markets. As and when the Indian rupee stabilises they could re-enter,” Mathew said.

Analysts say investors should be cautious with the market now. Shardul Kulkarni, senior technical analyst, Angel Broking, said, “The weekly and monthly charts are clearly weak, and short positions on Nifty at current levels are not advisable.”

If entering the market, investors should go in for a company that has cash on its balance sheet. “The way things are going on in India, its’ going to be blood bath,” said an analyst.

Export-oriented information technology and pharmaceutical companies stand to benefit from a weaker Indian rupee, but they also lose due on demand due to the euro zone crisis.