India’s financial markets experienced significant selling pressure on Tuesday, driven by concerns over a weakening rupee and escalating global trade tensions. The rupee reached an all-time low of 72.69 against the dollar due to strong demand from foreign banks and importers. Simultaneously, the benchmark BSE Sensex tumbled by 509 points, closing at a one-month low of 37,413.13. Over two days, the index lost nearly 1,000 points, following a decline of 467.65 points in the previous session.
The NSE Nifty, a 50-share index, fell below the 11,300-mark, dropping 150.60 points or 1.32% to 11,287.50. Intra-day fluctuations saw the index ranging from 11,479.40 to 11,274. The market witnessed a significant erosion of investors’ wealth, with a loss of Rs 4.14 lakh crore in two days, contributing to a more than 1% decrease in market capitalization to Rs 153 lakh crore.
The rupee’s slide to a new intra-day low of 72.74/75 prompted the Reserve Bank of India to intervene by selling dollars to curb the fall. Despite India’s strong GDP growth, the rupee has depreciated by approximately 13% in 2018, affected by higher oil prices, a broader sell-off in emerging markets, and a growing current account deficit.
Foreign investors pulled out over $1 billion (Rs 7,429 crore) from debt and equity markets in September, exacerbating the rupee’s weakness and the stock market downturn. Speculation about an RBI rate hike added to the negative sentiment, causing bond prices to fall and the 10-year benchmark bond yield to rise to 8.18%, its highest level in almost four years.
Analysts attributed the market’s pessimism to surging crude oil prices, a weakening rupee, a widening trade deficit, and negative global cues. Brent crude surpassed $78 a barrel, rising 1.30%, while concerns over the US-China trade war escalated. Major Sensex constituents, including Tata Steel and PowerGrid, recorded significant declines. FMCG stocks, such as ITC and Hindustan Unilever, suffered losses, and the auto sector experienced a decline in sales.
Small-cap and mid-cap stocks mirrored the benchmark indices’ fall, with sector-wise declines in consumer durables, FMCG, telecom, realty, infrastructure, metal, healthcare, auto, utilities, bankex, finance, power, PSU, energy, and oil & gas. Overall, the threat of trade tariffs, capital outflows, and concerns over domestic macros contributed to a cautious investor sentiment.