India’s stock markets on Friday witnessed a free fall as the Reserve Bank of India’s curbs on foreign exchange outflows sent the rupee plummeting to the 62 level against the US dollar on fears that the US monetary stimulus tapering would trigger selling by foreign investors.
With speculation about more capital controls haunting the market, the NSE Nifty plunged 4.08 per cent, or 234.45 points, to end at 5,507.85, marking its biggest single daily fall since September 22, 2011. The index closed below the psychologically important 5,600 level.
The 30-share Sensex opened lower at 19,297.11 from the previous close of 19,367.59. It dropped to a low of 18,559.65 and closed at 18598.18, a 769.41 point plunge, or 3.97 per cent, which is also the largest point-wise fall since July 6, 2009, when the index plunged by 870 points.
Gold was a major beneficiary from the mayhem in the rupee and stock markets. Standard gold shot up by Rs 1,175 to Rs 30,695 per 10 grams as investors turned to the yellow metal fearing further controls and rupee depreciation. Silver jumped Rs 2,970 to Rs 49,980 per kg.
Raghu Kumar, co-founder of broking firm RKSV, said, “The rupee’s fall to 62 today goes hand-in-hand with the 769-point Sensex drop; both are undoubtedly re-reinforcing each other’s falls. The RBI announced a series of moves aimed at clamping down capital outflows, a strange move since in recent times, the trend has been to open up Indian markets and ease capital controls. It seems that the government is running out of options....”
The rupee plunged to a lifetime low of 62.03 before recovering to close at a record low of 61.65 against the dollar as the RBI intervened and sold dollars to prevent a bigger crash. Investor wealth, or market capitalisation, plunged by nearly Rs 2 lakh crore in the selling avalanche. Consumer durables stocks fell 8.38 per cent, real estate 6.07 per cent, metals 5.56 per cent and banks 5.55 per cent.
A senior RBI official clarified that the RBI is not considering any capital control measures. “The RBI had rolled back