Mumbai: The BSE Sensex and NSE Nifty recouped more than half of losses in second half of trade to close 0.5 per cent lower on Wednesday, even after the Indian rupee fell over 1 per cent to hit a record low of 56.18 to the dollar and more than 2 per cent decline in European markets.
Recovery in later part of the session may be on hopes that the government may consider hike in diesel and petrol prices by this weekend. Government sources indicated that hike may take place after the completion of Budget parliament session, which ended yesterday.
According to sources, the ministry believes fuel price hike not only will turn around sentiment but it will help the government to move on the fiscal deficit aspect as well as the current account deficit.
The BSE benchmark touched an intraday low of 15,847.03, before closing at 15,948.10, down 78.31 points or 0.49 per cent led by 20 components. The NSE benchmark dropped 24.85 points or 0.51 per cent to 4,835.65.
Despite a slew of rescue efforts initiated by the Reserve Bank of India in the past few days, latest one being the announcement last evening that it will buy government bonds worth Rs 12000 crore, the rupee continued with its downslide, hitting a fresh low of 56.18 today. At the time of closing of Indian markets, it was trading at 56.09, down 70 paise as compared to previous close of 55.39 a dollar.
European markets like France's CAC, Germany's DAX and Britain's FTSE were down 2 per cent each ahead of informal European leaders summit today. Even retail sales data disappointed the street; UK's retail sales went down 2.3 per cent in April (MoM) and down 1.1 per cent (YoY).
The euro, commodities and commodity-linked currencies all were under pressure whereas safe-haven demand pushed the dollar index to 81.830 (at highest level since September 2010). Euro hit 21-month low as against the US dollar.
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