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  • Why Sensex rose 300 points and the rupee recovered from record lows

    Publish Date: September 12, 2018

    The Indian share market and currency market have been buoyed by news reports of the Indian Prime Minister Narendra Modi planning to take stock of the economic situation on Saturday.

    Several media reports suggest that PM Modi will hold a meeting in a bid to halt the rupee slide and fuel prices. Reports further said that new measures could be rolled out in the next few days. However, the Centre has already ruled out reducing taxes on petrol and diesel, saying that even a Re 1 per litre reduction would cost the state exchequer Rs 30,000 in a year.

    On Wednesday afternoon, BSE’s Sensex surged by 325 points to reach 37,738.38, while Nifty-50 grew 93.25 points 11,380.75 in reaction to the news. The rupee also saw a dramatic recovery, regaining 75 paise to be pegged at Rs 72.170 against the US dollar. The rupee had hit an all-time low of Rs 72.915 in the morning.

    Adani Ports, Sun Pharma and ITC were the top gainers on the Sensex. Consumer goods stocks and the metals index also gained on the back of the news.

    The Sensex and Nifty had lost about 1,000 and 300 points respectively in the last two trading sessions due to widening current account deficit, weakening rupee and high global crude prices.

    Tuesday was a dark day as foreign institutional investors (FIIs) took out Rs 1,454 crore from the stock markets. It marked the highest sell-off in a single day over the last three months. The massive pull-out comes amid emerging markets contagion emerging from Argentina, Indonesia and Turkey.

    India is not the only emerging market that finds itself in a crisis. A harrowing trade war between the US and China and rising crude oil prices have thrust emerging markets in the line of fire.

    Experts feel that capital flight may intensify if the emerging markets remain in a funk. That looks likely because the US markets have started performing well and expected tax cuts will further boost American industries.

    To exacerbate matters, there are reports of further rate hikes in the US. In simplistic terms, it means that foreign investors will have less money to invest.

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