Indian
stocks and
the rupee fell on Wednesday as uncertainty sparked by the country's
move to withdraw larger banknotes from circulation was compounded by
bets that Republican candidate Donald Trump was likely to win the U.S.
elections.
The
broader NSE Nifty fell as much as 6.3 percent, dragging the rupee lower
and prompting the central bank to intervene in currency markets in
morning trading, a trader said.
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However, bonds rallied - with the benchmark 10-year bond yield down 13 basis points at 6.67 percent.
The
bond yields fell as prices rose on a safe-haven bid and on hopes
Prime
Minister Narendra Modi's withdrawal of higher value banknotes would ease
inflation, raising the prospect of more rate cuts from the central
bank.
Modi on Tuesday
announced that 500 and 1,000 rupee banknotes would be withdrawn from
circulation at midnight to crack down on rampant corruption and currency
counterfeiting.
"The
impacts could be different depending upon sectors – deflationary in
some while contraction in others. This is a short-term risk for the
economy," Samiran Chakraborty and Anurag Jha, economists at Citi wrote
in a note.
The broader NSE
share index was down 3.7 percent as of 0536 GMT, while the benchmark
BSE Sensex was down 3.6 percent. Trading was highly volatile, with the
Nifty volatility index surging 21 percent.
The partially convertible rupee was at 66.92 per dollar versus its previous close of 66.6150/6250.
Real
estate shares were among the biggest decliners, reflecting a belief
that large amounts of black money are steered towards property
transactions. The Nifty Reality index was down 15.5 percent, with DLF
Ltd, India's biggest property developer, down 20.86 percent.
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