Slump in stocks, rupee roils Indian markets

Financial sector default fears trigger sell-off

Sell-off of the financial stocks along with a weak rupee and high crude oil prices dragged the S&P BSE Sensex down 536 points yesterday and the NSE Nifty50 lost nearly 170 points to close below 11,000 — slipping into the red for the fifth consecutive session.

The rupee weakened during the day to trade around 72.54 per US dollar against the previous close of 72.20. Authorities yesterday promised to support financial markets rocked by growing concerns of defaults by non-bank finance companies.

The government will provide adequate liquidity to mutual funds and non-bank financial companies, Finance Minister Arun Jaitley said.

Analysts expect the Reserve Bank of India to conduct more open market bond purchases to add liquidity to the market

and calm investors, while others see a special refinance window for non-banking finance companies and mutual funds.

“In our view, an acceptable solution is for the RBI to step up open market purchases that may spark off a rally in government securities that will bring back debt foreign portfolio investments and support the rupee,” said Aastha Gudwani, an economist at Bank of America Merrill Lynch.