Stock market extends slide on rupee dip, rate hike fears

The Sensex continued its southward journey this week, despite a strong recovery on the last trading day, due to persistent selling pressure from operators on fears of a hike in interest rates by the central bank following a rise in inflation and drop in the rupee.

The 30-share benchmark of the Bombay Stock Exchange dropped another 267 points during this truncated trading week, but managed to end well above the 20,000-mark.

Brokers said the market was also under pressure as the rupee fell to a two-month low of 63.91 against the dollar. A depreciating Indian unit could slow capital inflows into Asia's third largest economy and deter the Reserve Bank of India (RBI) from easing liquidity curbs further.

A falling rupee will fuel inflation, increase import bill and expand current account deficit (CAD).

Inflation, as measured by the consumer price index, rose to 10.09 per cent in October from from 9.84 per cent in the previous month, entering double digits after seven months, according to the government data.

The markets tumbled even after the data showed exports in October rose at the fastest pace in two years.

India's exports in October rose 13.47 per cent to $27.27 billion from a year ago while imports dipped 14.5 per cent, helping to narrow down the trade deficit.

Industrial production grew 2 per cent in September, mainly on account of better performance in the power and mining sectors.

The Sensex opened lower at 20,596.40 and fell further to 20,161.64 on selling pressure. But, it recovered afterwards to 20,672.53 before ending at 20,399.42, showing a loss of 266.73 points, or 1.29 per cent, over the last weekend close.

The BSE barometer surged over 200 points on Thursday (the last trading day as stock market was closed on Friday on account of Muharram).

The Sensex, which saw a pre-Diwali rally, has dropped by 797.39 points, or 3.76 per cent, in the last two weeks.