Indian shares tumble 6% on recession fears

Mumbai: India's main share index tumbled nearly six per cent yesterday to its lowest close in more than two years as the world's worst financial crisis in 80 years and a looming recession sent global markets reeling.

More European governments offered blanket bank deposit guarantees as regulators from Washington to Seoul scrambled to contain the crisis, but the moves failed to reassure investors as money markets remained tight, reflecting reluctance by banks to lend to each other.

World stocks dived to three-year lows as investors fled to government bonds and the low-yielding yen, fearing efforts by policymakers might not be enough to prevent a sharp slowdown.

The 30-share BSE index dropped 5.78 per cent or 724.62 points to 11,801.70, its lowest close since September 12, 2006, with all its components falling.

"The kind of selling coming in is distressing. Buyers are on strike," said Jayesh Shroff, fund manager at SBI Mutual Funds. "And added to that there are domestic liquidity issues."

The 50-share NSE index fell 5.7 per cent to 3,602.35, its lowest in 18 months.

Currency: Rupee falls further

The Indian rupee fell to its lowest since February 2003 yesterday after a 5.8 per cent dive in local stocks raised worries of more foreign fund outflows, while strong dollar demand from oil firms also weighed.

At 1118 GMT, the partially convertible rupee was at 47.84/85 per dollar, its lowest since February 14, 2003, and 1.6 per cent weaker than Friday's close of 47.075/085.

- Reuters