Domestic stock markets extended their losses for the second consecutive day on Monday, as the rupee fell to two-year lows and concerns over China slowdown resurfaced.
The benchmark S&P BSE Sensex fell 308 points, or 1.22%, to close at 24,893 points while the NSE Nifty ended at 7,558 points, down 96 points, or 1.26%.
The sell-off was also triggered by continued offloading of shares by foreign investors in the wake of growing concerns that the country is heading towards a below-normal monsoon rainfall for the second consecutive year.
Among the sectoral indices, metal and healthcare were the major losers. Metal stocks fell sharply due to intensifying worries over growth in the world's second largest economy, China. Vedanta, Hindalco, Coal India, Hindustan Zinc and Tata Steel saw losses in the range of 1.4% to 4.2%.
China has revised down its growth forecast to 7.3% for calendar year 2015, down from its earlier estimate of 7.4%. The move triggered a sell-off in metal stocks as the country is one of the world's biggest importer of commodities.
Meanwhile, profit booking led to a sell-off in pharma stocks. Stock prices of Lupin, Sun Pharma and Dr Reddy are ended over 2% lower.
Tata Motors ended flat despite weakness in the broader markets, as positive sentiment prevailed. Recently, the stock has shown some strength on reports of new car launches in the coming months.
Banking stocks also posted heavy losses, as concern grew over their net interest margins due to cut in base rates.
"Bank shares were hit on worries that net interest margins could be hurt on the back of cut in base rates while the weakening rupee which is fast approaching 67 levels dragged the markets. Further, growth concerns in China and fears of further devaluation of the yuan also aided the decline," Jagannadham Thunuguntla, Head of Fundamental Research at Karvy Group, told Business Standard.
Rupee Falls to Fresh Two-year Lows
The Indian rupee depreciated by 37 paise to touch a fresh two-year low of 66.83 against the US dollar, amid increased demand for dollars by banks and sell-off in equity markets.
"There is central bank support. Hence, rupee is holding around 66.80 levels," said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.
Snapping the three-day losing streak, gold prices went up by Rs 110 to Rs 26,840 per 10 gram as jewellers and retailers bought the metal to meet the festival-driven demand. The metal gained momentum in India despite weakness in the international markets.
However, silver prices fell Rs 325 to Rs 35,250 per kg due to subdued demand for the metal from industrial units and coin manufacturers.