The S&P BSE Sensex and the NSE Nifty indexes were down 11% each as of 12,53pm in Mumbai after earlier plunging to their lowest levels since 2016.
The gauges must tumble 15% from yesterday’s close to trigger another trading halt, after a 10% fall within minutes of the opening triggered a circuit breaker.
The currency pared an intraday drop of 1.3% that took it to a new low of 76.1563.
Prime Minister Narendra Modi and state leaders over the weekend imposed an almost-complete lockdown as cases of coronavirus spiked, a move that will probably worsen an economy already set to slow to an 11-year low.
The central bank, which is due to decide on interest rates April 3, is injecting both rupee- and dollar-liquidity and has pledged to do more to ensure financial markets function smoothly.
“I don’t see any relief ahead as the Covid-19 tightens its grip on India, dragging the economy into a prolonged slump ahead as most of its Asian peers,” said Prakash Sakpal, an economist at ING Groep NV in Singapore.
“The RBI has yet to respond with rate cuts. No matter it cuts or not, the rupee depreciation is likely to continue unabated.” The currency may drop as low as 78 per dollar in the coming months, he said.
The rupee recovered partially from its lowest point as state banks sold dollars on behalf of the central bank, according to two Mumbai-based traders.
The RBI last week took steps to boost liquidity but held back from following global peers with a rate cut. The government is considering offering easier loan repayment terms and tax breaks for smaller firms, a person with knowledge of the matter said.
The measures have failed to convince markets, and foreigners have dumped US$12.5 billion of shares and bonds this month amid the global rush for dollars.
Markets open
Meantime, a spike in volatility in the equity markets — the India NSE Volatility Index is trading near a multi-year high — and thousands in the financial industry working from home have led to questions about whether stock exchanges should remain open.
The finance ministry and the market regulator have come out in favour of keeping markets open for now despite the travel restrictions.
“Though we are able to run the show, it is not business as usual as collecting payment and executing trades is difficult,” said Dharmesh Kant, head of retail research at Indianivesh Securities Ltd. “The only people befitting from this are algorithmic traders.”
India’s market regulator on Friday evening raised margin requirements and capped equity derivatives exposure to discourage traders from aggressively building short positions and at tame volatility in the nation’s equities.
The Sensex last week marked its biggest weekly decline since October 2008.
“If India manages to avoid exponential growth of Covid-19 in the next two-to-three weeks, then with today’s fall, the market has priced in.” the spread of the infection, said Chokkalingam G, head of investment advisory at Equinomics Research & Advisory Pvt in Mumbai.
“If the lockdown continues beyond a month, then a further 5% to 10% slide can’t be ruled out.”