On September 3, while equities saw their worst single-day fall since October 2018, the Indian rupee registered its biggest single-day fall in over a month to close at its lowest level since November as weak domestic economic data, coupled with concerns over the U.S.-China trade tensions, made investors jittery.
The 30-share Sensex lost a massive 769.88 points or 2.06% to close at 36,562.91, with stocks like HDFC, ICICI Bank, HDFC Bank, Reliance Industries (RIL) and Axis Bank contributing the maximum to the benchmark’s losses.
This was the highest single-day loss for the benchmark since October 11, 2018 when it had lost 2.19%.
The broader Nifty ended the day at 10,797.90, down 225.35 points or 2.04%. The India VIX index, which is looked upon as a measure of near-term volatility, rose nearly 11% to close above the 18-mark at 18.06, though it is still much lower than its 52-week high of nearly 30.18.
Weak economic growth also impacted the rupee, which crashed 1.4% or 99 paisa — the biggest single-day fall in about a month — against the dollar on September 3.
The weakness in the Chinese currency amid trade tensions between the United States and China added to the currency’s woes.
“The sharp fall in the Q1 GDP growth to 5% and the weak core sector growth are the key factors that have caused a fall in the markets as it opened after a long weekend,” said Joseph Thomas, Head-Research, Emkay Wealth Management.
“The continuing negative global cues, the raging tariff war between the U.S. and China, and the likely sluggishness in the economic fortunes of economies around the world have also been behind the rout in the markets here as well as elsewhere,” he added.
Interestingly, the recent measures announced by the government to boost economy by way of bank mergers and also revoking the contentious tax imposed on foreign investors has failed to stem the outflows.
Provisional numbers showed that foreign portfolio investors (FPIs) were net sellers at ₹2,016 crore on September 3. FPIs net sold shares worth nearly ₹17,600 crore in August.
Elsewhere in Asia, the benchmarks of Japan, South Korea, Tawian and Indonesia all lost ground.
Rupee falls 1.4%
Data released by the government on August 30 post market hours showed that the country’s GDP growth for the April-June quarter fell to 5%, which is lowest in 25 quarters. The growth of eight core industries also dropped to 2.1% in July, mainly due to contraction in coal, crude oil and natural gas production.
The rupee, which opened weaker at 71.97 a dollar as compared to precious close of 71.41, touched the day’s low of 72.40 before closing at 71.39 a dollar. This the lowest closing level for rupee since November 13, 2018. The currency hit all time low of 74.38 on October 9, 2018.
The fall in the first trading session of month comes after a 3.6% depreciation in August - which is typically a ‘whimsical month’ for the currency, noted Madhavi Arora, Economist, Edelweiss Securities.
“Amid fears of strong case of currency manipulation by China as a retaliatory measure, and any disruptive move on that front could further weigh heavily on risk assets. This is likely to imply a follow up competitive pressure on EM Asia currencies, partially depending upon their trade linkages with China. Even as India's direct China exposure is limited, the indirect financial market linkages will ensure that INR [rupee] does not remain insulated from any market chaos,” Ms. Arora said.