Sensex hits near 2-week low on China sell-off

MUMBAI (Reuters) - India's stock markets fell nearly 2 percent on Monday to their lowest level in nearly two weeks after Chinese equities lost 7 percent, prompting exchanges in China to halt trading for the first time.

China's benchmark CSI300 share index tumbled 7 percent on the first session of 2016 after weak factory activity surveys soured hopes that the world's second-largest economy will enter the new year on better footing, and selling intensified throughout the day.

India's volatility gauge rose over 16 percent, its highest since Sept. 1.

"The correction in the market in China should not be a cause of worry because it has moved up without any fundamental backing (in 2015). The bigger concern is global deflationary pressures are rising," said G Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.

 

The broader NSE Nifty was trading 1.74 percent lower at 0712 GMT after falling as much as 1.88 percent earlier to its lowest level since Dec. 22.

The benchmark BSE Sensex was down 1.69 percent after falling as much as 1.85 percent earlier. The index touched its lowest level since Dec. 22.

All sectors were in the red with financial and bank stocks leading the fall.

Tata Motors , which counts China as a key market for its Jaguar Land Rover (JLR) sales, fell as much as 6.4 percent. The stock was also weighed down by a 4 percent decline in the company's sales in December.

Meanwhile, defying the downtrend, shares in IRB Infrastructure Developers rose as much as 11 percent on receiving a $1.5 billion road project contract.

Ashok Leyland gained 3.6 percent after the commercial vehicle maker said its total sales in December grew 31 percent.

(Reporting by Karen Rebelo in Mumbai; Editing by Gopakumar Warrier)