Sensex Slumps 400 Points, Rupee Rebounds After Falling To 6-Month Low

The rupee fell to a nearly 6-month low of 65.14 against the US dollar - its lowest since April this year.

Sensex Slumps 400 Points, Rupee Rebounds After Falling To 6-Month Low

At day's low, the Nifty slumped to 9,952.

Indian stocks markets fell sharply today while the rupee hit a nearly 6-month low amid concerns that the government's plan for a stimulus to halt economic slowdown may have a negative impact on the fiscal deficit. The Sensex ended 447 points lower at 31,922 while the Nifty settled at 9,964. Weak global stock markets amid North Korea tensions also hurt the domestic sentiment. The rupee fell sharply today to breach the 65 mark against the US dollar but recovered later. The rupee fell to a nearly 6-month low of 65.14 against the US dollar - its lowest since April this year.

10 Points To Know On Sensex Slump Today

1) The government is considering a plan to loosen the fiscal deficit target so that it could spend an additional Rs 50,000 crore this fiscal year, news agency Reuters reported, citing sources.

2) Finance Minister Arun Jaitley had said earlier that the government was looking for ways to lift economic growth, which slipped to a three-year low of 5.7 per cent in the April-June quarter.

3) Global investor sentiment was also subdued after North Korea said it might test a hydrogen bomb in the Pacific Ocean and escalated a war of words with US President Donald Trump.

4) "This remains a potential threat to the overall markets," said Teena Virmani, vice president, Kotak Securities. "Valuations are still a concern. There will be some kind of profit-booking at these levels wherein a large amount of froth had been built up in the last 1-1/2 months," said Ms Virmani.

5) The Federal Reserve on Wednesday announced a plan to start shrinking its balance sheet in October and signalled one more rate hike later this year. The US central bank's announcement of another interest rate hike this year took markets by surprise as a series of poor inflation readings had dampened expectations for such a step.

6) Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on other currencies as well as greenback-denominated commodities such as gold.

7) The Fed's announcement brightened the outlook for the dollar, helping push the greenback to near two-month highs against a basket of global currencies and eroding the appeal of emerging market assets.

8) According to latest RBI data, India's April-June current account deficit widened to 2.4 per cent of gross domestic product, or $14.3 billion - its highest in four years - as imports surged. However, analysts expect the RBI to cushion the rupee's volatility. The RBI last week said the foreign exchange reserves rose past $400 billion for the first time ever.

9) Foreign institutional investors have sold Indian shares worth nearly Rs 5,000 crore this month. Despite the recent weakness, the rupee is up 4 per cent against the US dollar this year, amid strong inflows into India's debt market. Analysts expect rupee to weaken over the course of this year. Rating agency India Ratings expects the rupee to fall to 65.50 by March next year.

10) At afternoon trade, the rupee traded marginally higher at 64.79, recovering the early tumble. The rupee had closed at 64.81 on Thursday.

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