Rupee Drops Most in a Month as Indian Stocks Enter Bear Market

  • Global funds have sold a net $2 billion of shares in 2016
  • Currency has lost 3.1 percent in Asia's worst performance

India’s rupee weakened the most in a month as fund outflows from local stocks drove the benchmark equity gauge into a bear market.

The Indian currency is Asia’s worst performer this year as a China-led emerging-market rout coincides with fading confidence in Prime Minister Narendra Modi’s ability to push through economic reforms. Global funds have pulled out a net $2 billion from the South Asian nation’s shares in 2016.

The rupee halted a two-day advance, retreating 0.7 percent to close at 68.30 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. That’s the biggest drop since Jan. 14 and took its 2016 decline to 3.1 percent. The currency fell to as low as 68.3450 earlier, its weakest level since September 2013.

The benchmark S&P BSE Sensex index of shares tumbled 3.4 percent to close at its lowest level since May 2014. It has fallen 23 percent from a January 2015 record, satisfying the definition of a bear market.

“Our equity markets are tanking and that’s getting reflected in the currency’s movement,” said Gaurav Sharma, a senior currency analyst at Religare Commodities Ltd. in Noida, near New Delhi. “The rupee will chart its own course once the selloff abates.”

The rupee’s slide belies improvements in Asia’s third-largest economy, which has seen plunging oil prices help narrow its current-account deficit from a record and the pace of economic growth overtaking China’s. Investors will be watching the annual budget on Feb. 29 for signs of progress in Modi’s agenda.

Indian sovereign bonds ended little changed on Thursday, with the yield on notes due January 2026 at 7.72 percent, prices from the central bank’s trading system show.

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