The BSE Sensex and the Nifty crashed on Monday, falling nearly 4 per cent in one of the biggest sell-offs in recent years. The rupee also came under pressure; it slumped 1 per cent to hit a fresh two-year low of 66.50 per dollar.
The Sensex crashed over 1,150 points to 26,212, while the 50-share Nifty slipped below the crucial 8,000 levels for the first time in two months. All 50 shares in the Nifty traded in the red, while on the broader BSE 500 index, just five stocks traded higher.
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Trading apps to one side for now, it seems that the rupee has weakened from 64 per dollar to nearly 66.50, a fall of nearly 4 per cent since August 11 when China announced the devaluation of its yuan currency.
Reserve Bank of India Governor Raghuram Rajan on Monday said that India is better off than among emerging market countries. The macro-economic problems are under control, low inflation will give investors trust in markets, he said.
To soothe investor sentiments, Dr Rajan said the central bank will not hesitate to use reserves to reduce the volatility in currency.
The trigger for Monday’s carnage is the rout in Chinese equities. Shanghai shares dived 9 per cent to a five-month low, having lost more than 10 per cent so far this month.
The selloff in China markets weighted on risk assets across the globe. Asian stocks dived to 3-year lows. Copper, seen as a barometer of global demand, tumbled to 6-1/2-year lows as the anxiety over China sapped investor confidence.
This the third straight day of big selloff in Indian stock markets. The widespread unrest in markets was set in motion nearly two weeks ago when China sharply devalued the yuan and stoked concerns about the state of its economy. There are fears that China could be forced to devalue the yuan even more should its economy falter.
The devaluation in the yuan has impacted most emerging market currencies and stoked fears about a currency war. South Africa’s rand struggled at 14-year lows, the Turkish lira languished near a record low, while the Malaysian ringgit hit a 17-year low.
The depreciation in the rupee hits foreign investors and diminishes their returns. Analysts say foreign funds have started selling shares aggressively because of the rupee fall. On Friday they sold shares worth Rs 2,340 crore, which is the biggest selling since April 2015.
Domestic markets are also likely to face liquidity issues because of the 10 per cent stake sale in state-run refiner Indian Oil Corp. The floor price for the share sale is Rs 387, a two per cent discount from Friday’s close. At the floor price, the 10 per cent stake sale in the company will bring in Rs 9,396 crore for the government.
Source: ndtv.com
