Rupee tumbles with stocks as virus cases in India hit new record

Bloomberg

India’s deepening coronavirus crisis slammed the nation’s stocks and currency on concern it will deliver a fresh blow to an economy that’s only just recovering from the worst contraction in nearly seven decades.
The Indian rupee dropped past 75 to a dollar for the first time since August 2020, while the benchmark S&P BSE Sensex Index declined as much as 3.7%, the most in nearly two months. India reported a record 168,912 new infections on Sunday, taking the tally to 13.53 million cases.
Many provinces across the nation, from the financial hub Mumbai to capital New Delhi, are bringing back stricter restrictions on movement of people to curb the surge in cases. Reports are emerging of hospital beds running short and immunisation centers turning away people as they run out of vaccines.
That and a vaccine shortage “are unnerving markets and no one is sure whether lockdowns will help bring cases under control,” said Deepak Jasani, head of retail research at HDFC Securities. Given the uncertainty, “the incentive to try and bottom-fish at this point is limited for traders.”
The NSE Nifty 50 Index also dropped by a similar magnitude, making India’s key stock indexes worst performers in Asia on Monday. All 19 sector sub-indexes compiled by BSE Ltd. slipped, led by a gauge of property and industrial shares.
India’s virus resurgence has prompted some brokerages to reconsider their preference for stocks most sensitive to the economic recovery. Nomura cut the weight of financials and cement shares in its model portfolio, while Jefferies downgraded Indian banks to underweight from overweight.
Not everyone is pessimistic. India’s long-term outlook remains strong and any decline in equities due to the new wave of infections should be used as entry point by investors, according to Prabhudas Lilladher Ltd. India’s gross domestic product is forecast to grow by as much as 12.5% this fiscal year, which would make it the world’s fastest-growing major economy.
Bonds were little changed and held on to last week’s gains, with the yield on the benchmark 10-year notes hovering near the lowest since mid-February, amid optimism the central bank may keep its policy accommodative for long to support the economy.