India Rupee Slumps With Stocks This Week as Risk Sentiment Wanes

  • Benchmark equity gauge enters bear market as global funds flee
  • Currency is Asia's worst performer this year after the won

India’s rupee completed its biggest weekly decline since mid-January as overseas funds fled the nation’s stocks amid a global equity rout.

The currency is Asia’s worst performer this year after South Korea’s won amid renewed concern about the health of the world economy and dwindling investor confidence in Prime Minister Narendra Modi’s ability to push through economic reforms. The S&P BSE Sensex index of shares has fallen more than 20 percent from a January 2015 record, meeting the common definition of a bear market.

“It’s really all about the weak risk sentiment globally and the weakness in domestic equities,” said Divya Devesh, Singapore-based Asia foreign-exchange strategist at Standard Chartered Plc. “If we do see some stabilization in risk from here, we will see a pullback in the rupee as well.”

The rupee retreated 0.9 percent this week to 68.2350 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It fell to as low as 68.4725 on Friday, near a record low of 68.845 seen in August 2013. The currency’s one-month implied volatility, a gauge of expected swings used to price options, surged 86 basis points this week, the most since August, to 7.78 percent.

The Sensex plunged 6.6 percent from Feb. 5, capping its biggest weekly loss since 2009. Foreign funds have pulled a net $2.1 billion from Indian equities this year.

Local sovereign bonds fell for a second week, with the yield on notes due January 2026 rising two basis points to 7.72 percent, prices from the central bank’s trading system show. It rose one basis point on Friday.

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