The rupee's in for a volatile ride as dollar continues to gain strength through its safe-haven status. So far, India's reform packages have not led to a bounce back. Image Credit: Reuters

Mumbai: India’s benchmark stock gauge and currency fell, as a plunge in oil prices heightened investor concerns about global growth.

The S&P BSE Sensex Index slumped 3.2 per cent to close at 30,636.71 - its biggest drop in three weeks, while the rupee declined 0.4 per cent to 76.835 per US dollar, near a record low touched mid-April. Asia’s third-largest economy is near a standstill amid a prolonged lockdown to prevent the spread of the coronavirus.

While India is a net importer of crude, a collapse in oil futures on Monday amid stagnant global demand exacerbated recession fears. India’s NSE Nifty 50 Index lost 3 per cent, the most since April 1 and yields on local 10-year government bonds were little changed at 6.21 per cent.

India’s government and central bank are trying to cushion the economic effect of virus-enforced closures with fiscal and monetary policy measures. Reserve Bank of India on Tuesday eased investment conditions for banks that borrow under its targeted long-term repo operations.

Some makers of information-technology hardware in India, farmers and industries in rural areas resumed operations from Monday even as the lockdown was extended until May 3.

Shift in gears will be gradual

“Efforts to ramp up the economy once the lockdown has been lifted may take a toll as the lack of employees as well as demand may strike down hard on industrial activity,” analysts at Motilal Oswal Financial Services Ltd. wrote in a note to clients.

With the earnings season underway, Infosys Ltd. on Monday refrained from projecting full-year revenue for the first time in years, joining a growing list of businesses around the world struggling to assess the fallout of the COVID-19. So far, four Nifty 50 members have reported quarterly results.

‘With equities wobbling, a pall cast on global demand and a stronger dollar in its wake, the reflex may be for capital to leak out of emerging markets - India included,” Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore.