Emerging-market stocks and currencies slumped on Monday as manufacturing in China weakened for a fifth straight month, the longest such streak since 2009 and tensions escalated in West Asia. Saudi Arabia cut ties with Iran and expelled the Islamic Republic’s diplomats, a day after its embassy in Tehran was attacked to protest the Saudis’ execution of a prominent Shiite cleric.
India’s benchmark stock index tumbled the most in more than three months. The Sensex declined 2.1%, or 537.55, to 25,623.35 after capping a third weekly gain on Friday while the Nifty Index tumbled 2.2% to 7,791.30. India VIX Index, a gauge of the cost of demand for protection against stock-market swings, surged the most since August 24.
State Bank of India, Punjab National bank, Indian bank and Canara Bank tumbled to new 52-week lows even as they lost 2% to 4% of their values. Capital goods players Larsen & Toubro and BHEL touched their lowest levels in a year.
India’s rupee fell the most since November on speculation that demand for riskier assets will be hurt.The rupee depreciated 0.7% to 66.6175 a dollar in Mumbai, the biggest decline since November 9, according to prices from local banks compiled by Bloomberg. The rupee weakened 4.7% in 2015 in its fifth straight annual decline, the longest stretch since 2001.
The rout began after data showed manufacturing in China weakened for a fifth month. Losses in local stocks deepened after an index showed a contraction in India’s manufacturing for the first time in more than two years.The Nikkei and Markit India Economics Index fell to 49.1 in December, the lowest since August 2013, data showed Monday.
The Sensex slid 5% last year, after rising 30% in 2014, as euphoria over Prime Minister Narendra Modi’s economic agenda waned and concern grew that tighter US monetary policy will curb the appeal of higher returns offered in emerging markets. Global funds bought $3.3 billion of local shares in 2015, the smallest inflow in four years.
The Sensex trades at 15.3 times projected 12-month earnings, compared with a multiple of 10.7 for the MSCI Emerging Markets Index.
The sell-off extended to smaller stocks with 40% of the BSE 500 companies losing more than the benchmark.
Around 30 stocks from the top 500 companies fell more than 4% on Monday with SREI Infra, Tata Motors and Adani Enterprises falling 7.5%, 6.1% and 5.7%. Several public sector banks were in the red including IDBI Bank, Bank of Baroda and Oriental Bank of Commerce which lost more than 5% in Monday’s trade.
With Bloomberg inputs