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Sensex sees biggest decline in 7 years, PM Modi reviews situation

business Updated: Sep 22, 2015 11:57 IST
HT Correspondents
HT Correspondents
Hindustan Times

The BSE Sensex plunged over a 1,000 points in early trade, while rupee crashed to a two-year low against the US dollar on Monday, August 24, 2015.(HT File Photo)

India’s share markets sank nearly 6% on Monday, the most in seven years, rattled by a wobbly Chinese economy that has sparked a global rout and raising concerns about costlier imports and other policy dilemmas for the government and Reserve Bank of India (RBI).

The 30-share Sensex closed 5.94%, or 1,624.51 points, lower at 25,741.56, wiping out Rs 7 lakh crore of investors’ wealth within hours of trading.

It was the lowest close since August 11, 2014.

The National Stock Exchange (NSE)’s 50-share Nifty closed 5.92%, or 490.95 points, down at 7,809 points, its lowest close since October 17, 2014.

The rupee also fell sharply by 82 paise to 66.65, the lowest since September 2013.

In percentage terms, it was the biggest fall for the Sensex since the 7.25% plunge on January 7, 2009. In absolute terms, it was the biggest decline since January 21, 2008, when the Sensex fell 2,062.20 points.

The government moved in to soothe frayed nerves assuring investors that the Indian economy’s fundamentals were robust enough to weather the worldwide slump.

Prime Minister Narendra Modi took stock of the situation favouring speedier reforms to bolster India’s economy.

“The PM is of the opinion that in order to further strengthen our economy, we should take more steps,” finance minister Arun Jaitley told reporters late in the evening in New Delhi on Monday.

He said further discussion will be held with private and public partners to take measures to attract investors and use the situation as an opportunity.

"The Indian economy is reviving and the current global market turmoil will have a transient impact on India," the minister said on the sidelines of a tax conference in the Capital earlier in the day.

The meltdown spread across the globe.

The Dow Jones industrial average opened sharply lower Monday by 1,000 points, its largest single-day loss, as markets were roiled the world over, including in India, by an 8.5% drop in Chinese shares.

Futures on the Dow, which has never lost more than 800 points in a day, S&P and Nasdaq were briefly halted and opened after hitting a circuit breaker, a tool used by exchanges to stem volatility and give the market a breather.

Japan’s Nikkei fell by 4.6%. In Europe, Germany, whose DAX dropped by 3.7%, has been among the worst hit by the sell-offs.

RBI governor Raghuram Rajan indicated that the central bank would not hesitate to dip its foreign exchange reserves to shore up dollar supplies and prop the rupee’s value.

“I wish to assure the markets that our macroeconomic factors are under control as the economy is in a much better position relative many other economies,” Rajan said at an event organised by industry association Ficci in Mumbai.

Struggling to claw out of its worst slowdown in more than a decade hit by shrinking exports—the edifice of its growth story—China’s central bank recently devalued the yuan by 1.9% to 6.23 to a dollar, the lowest in nearly three years. Its exports have shrunk 8.3% in July prompting the central bank to make the local currency weaker.

Analysts are also worried that China’s move could trigger a string of devaluations by other central banks to help their exporters.

Read: Why is China slowdown creating ripples across world markets?

Manic Monday: US, world markets plunge after Chinese stock rout

Monday mayhem: 10 things to know about Indian markets crash