Rising crude prices drag Sensex 360 pts, Nifty below 10,400; rupee falls sharply

The market fell sharply despite positive global cues on Tuesday, due to fiscal deficit concerns after rising crude oil prices in international market. The rupee hit 65 against the US dollar. Warning letter by USFDA to Lupin also hit sentiment.

The 30-share BSE Sensex declined 360.43 points or 1.07 percent to 33,370.76 and the 50-share NSE Nifty closed well below the 10,400-mark, falling 101.60 points or 0.97 percent to 10,350.20.

Experts feel if the crude oil prices increase further then that would be biggest concern for India and its fiscal deficit as the country imports 80 percent of oil requirement. The current fall, however, should be used as a buying opportunity, they advised.

"Political disturbance in Saudi is triggering high volatility in the crude prices, which is negative for India leading to depreciation in rupee. Additionally, continuous negative observations by USFDA on high quality Indian pharma companies are leading to a downgrade for the sector," Vinod Nair, Head of Research, Geojit Financial Services said.

Brent crude oil futures crossed USD 64 a barrel, the highest level since mid-2015 on Monday, rising 3.5 percent.

Ajay Bodke, CEO & Chief Portfolio Manager PMS at Prabhudas Lilladher said India needs to keep a cautious eye on the surge in global crude prices as every USD 1 per barrel rise in crude prices leads to its import bill rising by USD 1.33 billion. Also, a rising import bill can put downward pressure on rupee.

He further said in a fiscally constrained environment a weakening rupee can also lead to higher fiscal deficit if the government decides not to allow oil marketing companies to hike petrol & diesel prices for consumers and decides to absorb the increased fuel import bill.

While continuing to hold a positive outlook longer term, Nikhil Kamath (Co-Founder and Head of Trading, Zerodha) said he would advocate staying short in the near term as he sees volatility making a come back in the short term.

The broader markets fell more than benchmarks, with the Nifty Midcap losing 1.6 percent and Smallcap 1.4 percent. About three shares declined for every share rising on the NSE.

Meanwhile, the Indian rupee depreciated by 35 paise to 65.03 a dollar on weak equity market condition and rising crude oil prices.

All sectoral indices barring IT closed in negative terrain. Nifty Pharma and PSU Bank plunged 4 percent each, followed by Auto (down 1.15 percent) and Metal (1.7 percent). IT index gained 2.2 percent on correction in rupee.

Lupin was biggest loser among Nifty 50 stocks, falling 17 percent as it has received a warning letter issued by the USFDA on November 6, for formulation manufacturing facilities at Goa and Indore (Pithampur Unit II).

The news hurt other pharma stocks also. Cipla was down 7 percent despite better results. Sun Pharma and Aurobindo Pharma declined over 2 percent.

PSU banks saw profit booking today. Union Bank, OBC, Andhra Bank, PNB, Bank of India, SBI, Canara Bank and Indian Bank were down 3-6 percent. Among technology stocks, Infosys, HCL Technologies, TCS and Tech Mahindra gained 2-4 percent.

Reliance Industries, IOC, Tata Motors, Bharti Airtel, HDFC, ONGC, Yes Bank and ICICI Bank among others were down 1-3 percent.

Jyothy Labs crashed 14 percent as the company said Henkel has not exercised their option to buy a share of up to 26 percent in company. The maturity date for this option was October 31, 2017.

Century Enka and Just Dial corrected over 8 percent, but VIP Industries was up 4 percent after Q2 earnings.

MMTC rallied 10 percent and STC gained 3 percent on merger buzz. PC Jeweller was down 6.5 percent and Titan fell 4 percent on profit booking.

NBCC was up 8 percent as Bank of America Merrill Lynch has initiated coverage with a buy rating on the stock. It has set a target price at Rs 330 per share, implying 25 percent upside from Monday's closing price.

Asian markets ended higher, following positive lead from US and higher crude oil prices. Japan's Nikkei rallied 1.7 percent and Hong Kong's Hang Seng gained 1.4 percent. European markets were trading flat at the time of writing this article.