A benchmark index of Indian equities markets closed Thursday's trade more than 500 points down on capital outflows following a record depreciation of the rupee and negative global cues after the US Federal Reserve signalled an end to its bond-buying programme.
On Thursday, the partially convertible rupee opened sharply lower and hit a record low of 59.93 in the morning session at the inter-bank foreign exchange market in Mumbai, surpassing the previous record of 58.98 registered June 11.
The rupee had closed at 58.71 Wednesday. The drop in the Indian currency came after US Federal Reserve Chairman Ben Bernanke signalled that the US Fed would start winding down its stimulus spending later this year.
The withdrawal in the stimulus spending is anticipated to have a profound impact on global financial liquidity -- this might lead foreign investors to pull out of the Indian markets, which are impacted by a sluggish economy, high interest rates and a sticky inflation level.
"Fears over earlier-than-expected withdrawal of monetary stimulus by Fed led to a sharp fall in markets across the world and India was no exception," said Dipen Shah, head, group research, Kotak Securities.
"Benchmark indices had one of the largest falls in terms of absolute points. Concerns over withdrawal of funds by FIIs and the consequent impact on the rupee as well as financing of CAD (current account deficit), soured sentiments," Shah elaborated.
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There was heavy selling in stocks such as banks, metal, oil and gas, capital goods and public sector undertakings (PSUs).
The 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 19,069.20 points, closed at 18,719.29 points, down 526.41 points or 2.74 percent from its previous day's close at 19,245.70 points.
The Sensex touched a high of 19,069.20 points and a low of 18,687.19 points.
The wider 50-scrip Nifty of the National Stock Exchange (NSE) also plunged massively. It closed down 2.86 percent or 166.35 points down at 5,655.90 points
There was heavy selling pressure in stocks such as banks, metal, oil and gas, capital goods and public sector undertakings (PSUs). All sectoral indices of the S&P BSE closed in the red.
The S&P BSE bankex plummeted 539.89 points, metals index dipped 374.99 points, capital goods index plunged 274.78 points, oil and gas index was lower by 263.04 points and PSUs index slipped 172.23 points.
Only two of the 30-sensitive companies gained in the day's trade: Wipro, up 1.28 percent at Rs.347.45 and Sun Pharma, up 0.69 percent at Rs.967.80.
The main losers were: Jindal Steel, down 9.62 percent at Rs.222.15; Tata Steel, down 6.25 percent at Rs.272.40; Hindalco Inds, down 6.24 percent at Rs.97.70, BHEL, down 4.99 percent at Rs.171.30; and Sterlite Inds, down 4.52 percent at Rs.81.40.
Among other Asian markets, Japanese Nikkei was down by 1.74 percent and the Shanghai Composite Index was lower by 2.88 percent. The Chinese Hang Seng dipped by 2.77 percent.
The European markets were in the red too. While London's FTSE 100 was trading down by 2.50 percent, Germany's DAX Index was lower by 2.43 percent and France's CAC 40 Index was 2.51 percent down.