SENSEX AND NIFTY SCALE FRESH HIGHS

Benchmark indices rallied sharply for the second straight day on Monday after investor sentiment improved following the proposed trade talks between the US and China. Gains in index-heavyweights Reliance Industries and Larsen & Toubro propelled the Sensex to a new all-time high and helped the Nifty50 index to close above 11,500 for the first time. The Sensex gained 330.8 points, or 0.87 per cent, to close at 38,278 — less than 5 per cent shy of the 40,000-mark.

Depreciation of the rupee against the dollar will have limited impact on sovereign ratings of India, even as pressure on the corporate and banking sectors is likely to increase, Fitch Ratings said on Monday.

There could be further bouts of pressure on markets as global monetary tightening progresses, it said. The impact on the ratings would be limited by the country's relatively strong external finances, especially the low level of external debt.

Currency depreciation could nevertheless add to existing pressures in the corporate and banking sectors, it added.

The rupee has been among the emerging-market currencies affected by pressures from global monetary tightening and, more recently, contagion from the Turkey crisis.

It has depreciated by around 9 per cent against the dollar since the start of 2018, making it the worstperforming major currency in Asia.

Idiosyncratic factors have also contributed, such as the widening of the trade deficit in July 2018 to its largest gap since May 2013, the rating agency said.

Net portfolio outflows through mid-August totalled $5.5 billion for the year, mostly in bonds, compared with inflows of $27.9 billion over the same period in 2017.

Foreign direct investment inflows have also weakened and no longer cover the current account deficit – in other words, India's basic balance has turned negative, it said.