Sensex tumbles 450 points after rupee hits record low

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex slumped nearly 2.5 percent on Tuesday as lenders such as Yes Bank fell on fears that the Reserve Bank of India (RBI) would announce new cash-draining measures to defend the rupee which hit a record low.

The rupee's depreciation is sapping the confidence of traders who are concerned that the central bank's measures to tighten liquidity are already threatening economic growth.

The Nifty has fallen 8.1 percent since July 15, the first time that the RBI announced steps to drain cash.

The rupee's record low of 61.80 touched on Tuesday means new measures could follow or existing ones would be extended for a prolonged period to quell volatility.

 

Still, the after market-hours appointment of Raghuram Rajan, the chief economic adviser in the finance ministry, as RBI governor starting in early September could help support sentiment, raising expectations for a new approach.

"My sense is liquidity tightening measures are here to stay. There cannot be any time-frame as there is no clarity on (U.S.) Fed's tapering programme," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co Ltd.

The BSE Sensex fell 2.34 percent, or 449.22 points, to end at 18,733.04. This was its biggest single-day percentage fall since June 20. It closed below the psychologically important 19,000 mark.

The Nifty slumped 2.52 percent, or 143.15 points, to end at 5,542.25, marking its lowest close since April 12.

The banking sub-index slumped 3.9 percent on continued speculation that the RBI may announce more steps to prop up the rupee.

Yes Bank fell 8.2 percent, while HDFC Bank lost 3.8 percent and ICICI Bank Ltd ended 4 percent lower.

Financial Technologies shares lost 19.7 percent after its commodity exchange unit National Spot Exchange Ltd (NSEL) halted its electronics trading services.

The Multi Commodity Exchange of India Ltd , which is 26 percent owned by Financial Technologies, also fell 10 percent even as the exchange said it was a "totally different" entity from NSEL.

Bharat Heavy Electricals Ltd fell 6.8 percent, adding to Monday's 19.3 percent decline, marking its lowest intraday level since November 2, 2005. The company's quarterly profit dropped 49 percent on sharply lower sales in its power and industry businesses in a slowing economy.

Drug maker Lupin Ltd shares fell 0.9 percent a day ahead of its earnings. The company may miss the consensus operating profit forecast for the April-June quarter when it reports results on Wednesday, according to Thomson Reuters StarMine data.

Among the gainers, power equipment maker Crompton Greaves shares rose 3.1 percent after the company's quarterly operating profit beat expectations, dealers said.

(Editing by Prateek Chatterjee)