Sensex Tumbles 300 Points, Rupee Edges Toward 67/Dollar

Indian markets fell sharply today amid a crash in China stocks. The Sensex tumbled over 300 points while Nifty plunged below 7,650.

Trading in China markets have been suspended for the day after Shanghai shares tanked more than 7 per cent.

This is the second time this week trading was suspended in China. On Monday, trading was suspended for the day, following a 7 per cent tumble in its shares.The crash in China markets also triggered a sharp fall in other Asian markets. Japan’s Nikkei shed 1.5 per cent while South Korea’s Kopsi fell 0.7 per cent.

Analysts attributed the crash in China market to the sharp fall of the nation’s currency yuan – which fell to lowest since March 2011- deepening concerns about the economy and the potential for competitive devaluations by other countries.

The rupee fell to 66.92/dollar today, continuing its recent weakness amid a depreciation of the Chinese yuan. The rupee had closed at 66.82 on Wednesday.

The Chinese central bank, People’s Bank of China, today set the yuan rate at 6.5646 per dollar, 0.50 per cent weaker than the previous fix 6.5314. This is the biggest fall of yuan since August and eighth day in a row China has set its currency lower.

Financial markets fear the yuan’s rapid depreciation may accelerate, which would mean China’s economy is even weaker than had been imagined, and could therefore spark another wave of competitive devaluations around Asia and in other key economies.

A surprise devaluation in August last year saw China lower the yuan nearly 5 per cent against the dollar in a week, sending tremors through global markets on concerns Beijing was struggling to control a slowdown in growth.

In the Indian markets, metal stocks came under strong selling pressure on concerns that the depreciation of the Chinese yuan could make imports cheaper.

Overnight, the Wall Street closed at three-month lows overnight amid the general risk aversion, amplified by a continuing decline in crude oil prices and geopolitical concerns following North Korea’s nuclear test on Wednesday. The Dow Jones industrial average ended down 252.15 points, or 1.47 per cent.

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Source:Ndtv

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