India’s currency and equity markets fell sharply on Tuesday amid looming worries that two crucial proposed laws related to new land acquisition rules and a nationwide goods and services tax (GST) could get delayed further.
The 30-share BSE index fell 629.82 points or 2.29% to close at 26,877.48. Tuesday’s fall has wiped out a significant portion of the nearly 1000 point rebound over the last two days after government said it would not issue any fresh notices to foreign institutional investors (FIIs) for paying minimum alternate tax (MAT).
The broader Nifty slipped below the 8,200-level by falling 198.30 points or 2.38% to close at 8,126.95.
Forty-eight of the 50 stocks that make up the broader Nifty fell after the news came in that the government has agreed to review the Land Acquisition Bill and the Good and Services Tax Amendment, rattling investor sentiments.
The rupee fell 32 paise closing at 64.17 to a dollar—its lowest level since September 6, 2013.
Fears over weak factory output numbers that was released after market hours also pulled down share prices.
India’s factory output measured by the index of industrial production (IIP) grew by a slower 2.1% in March from 5% in February—mirroring a wobbly industrial recovery as shown muted corporate earnings.
The good news, however, was that retail inflation in April eased to a four-month low of 4.87% from 5.25% in the previous month on moderate rise in prices of food items, vegetables and fruits.
This will give the Reserve Bank of India (RBI) more elbow room to cut interest raising hopes of lower loan rates for millions of home buyers
“Retail inflation dipping below 5% after a gap of three months and IIP growth remaining lack-lustre suggest a high likelihood of a rate cut in the June 2015 review of monetary policy,” said Aditi Nayar, senior economist of ICRA, a credit rating and research firm.