Indian markets tumble as rupee hits record low

Mumbai: Indian financial markets tumbled on Monday as investors ran for cover in the face of the global fin-ancial crisis, knocking shares to their weakest level in three years and the rupee to a record low.

Money market rates rose sharply ahead of a holiday and as the central bank intervened in currency markets to support the rupee.

Signs of a looming global recession and slowing corporate earnings heightened investor risk aversion across Asia, helping send India's benchmark index down as much as 11.5 per cent at one point and stoking worries that ebbing foreign capital would drag the rupee down still further.

The 30-share index fell below 8,000 points to its lowest level since October 2005 before recovering some ground to end down 2.2 per cent at 8,509.56, its lowest since November 2005.

It has lost 58 per cent so far this year, the worst performer in Asia in 2008 after China, Hong Kong and Vietnam, as foreign investors have sold emerging market assets and repatriated their funds.

The index rose 47 per cent in 2007 when foreigners pumped in a record $17.4 billion. Outflows so far this year are $12.3 billion.

The partially convertible rupee, whose fortunes are closely tied to foreign flows in and out of the stock markets, slid to a record low of 50.24 per dollar, even though traders reported central bank intervention to prop it up.

Further fall likely

The currency could fall to 52.5-54.00 per dollar by the end of the year as capital is drained from the country and pressure builds on the trade deficit from falling exports, Kotak Mahindra Bank said.

Bond and money markets are closed today for Diwali. Stocks will trade briefly in the evening.