(MENAFN- Gulf Times) Indian equities closed lower in volatile trading yesterday on concerns from economy to coronavirus infections to a border clash with China.
The benchmark S & P BSE Sensex dropped 0.1% after earlier rising as much as 0.9%.
The index has risen more than 45% from a low in March, outperforming the MSCI Asia Pacific Index during this period.
The NSE Nifty 50 index fell 0.3%
While Asia''s third-largest economy has eased some of the virus-induced restrictions, its outlook is yet to improve after having posted its worst contraction on record in the June quarter. India has now overtaken Brazil as the country with the second-highest number of infections and it seems inevitable that the nation will at some point overtake the US as well.
''Indian equity markets seem to be reflecting undue confidence about the future path of recovery, Kaushik Das, an economist at Deutsche Bank AG wrote in a note. Stocks are not reflecting the real economy''s condition, and ''the divergence is getting more stark with each passing day, he wrote.
A gauge of bank stocks dropped 0.9% after the central bank announced rules to restructure loan accounts that have turned bad due to the pandemic.
The rules will provide relief to banks for the short term, but ''this would only postpone the stress, Yuvraj Choudhary and Mohit Mangal, analysts at Anand Rathi Financial Services, wrote in a note.
Yield on India''s benchmark 10-year government bonds rose 2 basis points to 6.05%, while the rupee weakened 0.4% to 73.60 per dollar.
Meanwhile the Indian rupee yesterday fell for the second day against the US dollar, tracking broad strength in the American currency.
The rupee yesterday settled at 73.60, down 26 paise from the previous close, after trading in the range of 73.39 to 73.65 against the US dollar. The rupee had settled at 73.34 against the US dollar in the previous session.
The dollar index, which gauges the greenback''s strength against a basket of six currencies, rose 0.57% to 93.260.
Foreign institutional investors were net sellers in the capital market as they sold shares worth Rs6.93 crore on a net basis on Monday, according to exchange data.
''If the broader USD remains stable the down side in USD-INR could be limited. It appears the RBI is content keeping volatility in check and allowing readjustments in USD/INR happen when there is a significant global USD move. Whenever that happens, the RBI steps aside and allows the rupee to align with the broader USD, said Abhishek Goenka Founder and CEO, IFA Global.
The rupee is down over 3% so far this year against the US dollar. The rupee has pulled back from about 77 levels against the US dollar amid strong inflows into domestic equity markets and broad dollar weakness.
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