Mumbai, Aug 16 (PTI): The S&P BSE Sensex on Friday fell by 769 points, the biggest in four years, as the rupee plunged to an all-time low amid fears that the government may move to a capital-control regime to curb forex volatility and check the current account deficit.
The rupee fell to 62.03 against the dollar, after the Reserve Bank of India announced additional steps on Wednesday to restrict foreign-exchange outflows and gold imports.
The markets were also spooked by expectations that an improving US economy would lead to a flight of foreign capital from the domestic markets.
“The fear (among foreign investors) is that recent RBI measures may bring capital control measures back in a much bigger way. The markets crashed chiefly because of this,” said Gautam Sinha Roy, VP-Equities, Motilal Oswal Securities.
The stock markets were jolted by weakness in global stocks after a steep fall on Wall Street on Thursday as jobless claims declined to the lowest level since 2007, renewing concerns that the US Federal Reserve would start withdrawing its stimulus from as early as next month.
The 30-share Sensex opened lower at 19,297.11 from the previous close of 19,367.59. It dropped to a low of 18,559.65 and closed at 18598.18, a 769.41 point drop, or 3.97 per cent.
This was the largest point-wise fall since July 6, 2009, when the index plunged by 869.65 points. Investors were over Rs 2 lakh crore poorer as 6 out of 10 stocks fell on the BSE.
On August 14, the RBI had announced stern measures to curb dollar outflows, including limits on Indian firms investing abroad and on outward remittances by resident Indians.
Top RBI sources blamed “unwarranted rumours” about controls on FII money to the market crash. The Finance Ministry said Friday that RBI's steps on Wednesday cannot be called capital control measures and they had more to do with reducing stress on balance sheets.
All 13 sectoral indices closed lower, with consumer durable, realty, metal, banking, capital goods leading the fall. Hero MotoCorp rose 2.4 per cent, the sole Sensex gainer.