Mumbai: India's stock markets fell 2 percent on Thursday to their lowest level in more than three weeks after China accelerated the depreciation of the yuan, sparking sharp falls in regional equity and currency markets.
China also suspended its stock markets for the rest of the day less than half an hour after opening as a new circuit-breaking mechanism was tripped for the second time this week.
The concerns about markets in Asia's second-largest economy sent India's VIX, which measures the local market's expectation of volatility in the near term, higher by more than 12 per cent to its highest level since November 16.
Still, analysts felt Indian shares would ultimately withstand the volatility triggered by China, given the sturdier economic fundamentals.
"I think the market is over-reacting. The fundamentals of the market and the economy are far better than what one could hope for," said Deven Choksey, managing director at KR Choksey Securities.
The broader NSE Nifty was down 1.97 per cent at 2.1 p.m. after falling as much as 2.07 per cent to its lowest level since December 14 earlier in the day.
The benchmark BSE Sensex was 1.87 per cent lower after falling as much as 2 per cent to its lowest level since December 14. Both indexes have lost about 5 per cent each this week.
Mid-cap stocks fell the most with the BSE mid-cap sub index declining as much as 2.64 per cent.