The benchmark stock indices and the rupee posted their biggest single-day fall since the Brexit vote in June amid concern that overseas investors may slow the pace of their purchases if tensions between India and Pakistan escalate.
The broader Nifty of the National Stock Exchange (NSE) fell 153.90 points, or 1.76 per cent, to 8,591.25, while the 30-share S&P BSE Sensex slumped 465.28 points, or 1.64 per cent, to close at 27,827.53. All but one stock lost ground in the Sensex pack. The overall market breadth was weak with 2,340 stocks declining, as against 411 gainers.
“Concern about potential escalation of tension at the border” triggered a market correction, said Gautam Duggad, Head – Research, Motilal Oswal Securities. “We expect the volatility to remain high for next few days, as situation gets clearer on the Indo-Pak front. This, however, is a good opportunity for accumulating select stocks where earnings visibility is high, fundamentals are supportive,” he added.
Data from the markets regulator show that foreign investors have been quite bullish on Indian equities this year, having invested Rs.47,883 crore in stocks since January.
The Indian currency weakened 0.6 per cent against the dollar, sliding 0.39 rupee to end at 66.855.
According to dealers, the central bank sold dollars through state-run banks to stem the depreciation in the rupee’s value.
“Over the next one-month period, we expect rupee to be range bound, around 66.50-67.50,” said Puneet Pal, head, fixed income, BNP Paribus Mutual Fund. “The fundamentals are healthy like the current account deficit, which is under control. The RBI is also expected to intervene to curb volatility.”
Bond yields also spiked with the yield on the benchmark 10-year government bond increasing 8 basis points to 6.86 per cent.
Markets may remain under pressure over uncertainty about the geopolitical situation between the two countries, with investors opting to take a wait and watch approach in the short term, said Dinesh Thakkar, Chairman & Managing Director, Angel Broking.
The Pakistan Stock Exchange’s KSE 100 Index slipped 59.50 points, or 0.2 per cent, to 40,295.52.