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Stocks, rupee weaken; bonds gain in line with global markets

Published: February 6, 2018

STORY: Indian shares slid more than 3 percent and the rupee weakened on Tuesday (February 06) as a global market rout whacked sentiment, adding to existing investor concerns ahead of a central bank meeting this week and a new capital gains tax later in the year.

The broader NSE Nifty and the benchmark BSE Sensex each fell as much as 3.7 percent, heading for a sixth consecutive session of falls, with both erasing their gains for the year.

Meanwhile, the rupee retreated to 64.35/64.36 at 0455 GMT from its 64.07 close. But bonds gained as investors sought safe havens.

The slump comes as India’s record-setting share rally came under threat following the government’s announcement of a 10 percent long-term capital gains tax in equities, which starts in April. That has raised concerns about a drop in foreign investment into India.

Meanwhile, fears are rising the Reserve Bank of India could become more hawkish as inflation accelerates and the government raises investments in rural sectors and healthcare. The RBI is set to conclude its two-day policy meeting on Wednesday (February 07) and is expected to leave rates on hold but could issue stronger warnings about inflation.

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