India's stock markets recover slightly after plunging on Monday

The BSE Sensex and Nifty 50 recovered only slightly on Tuesday Morning after the previous day’s stock markets plunge.

As of 9:40 am, BSE Sensex was up 0.15% or nearly 50 points at 37,970.72; Nifty was up 0.14% at 11,453. 90. Both the Sensex and Nifty had opened in green in early morning trade with the Sensex trading at 38,041 points and up 119 points in early morning trade before falling further to trade flat.

On Monday, India’s stock markets had plunged more more than 1% amid escalating trade war concerns between the US and China and fears of weakening rupee and India’s widening current account deficit gap. The 30-share BSE Sensex had closed at 37,922.17, down by 467.65 points or 1.22 per cent, its largest fall since mid-March. The Nifty had closed at 11, 438.10 points, its lowest level close in four weeks.

Spillover effect

India’s widening current account deficit and the depreciating rupee were factors behind Monday’s market meltdown. According to RBI data released on Friday, the country’s CAD had widened to $15.8 billion compared to $15 billion in the year-ago quarter.

The Indian rupee meanwhile touched al all-time low of ₹72.67 against the dollar, becoming the the worst performing emerging markets currency in Asia. The rupee has depreciated nearly 13% since the beginning of the year.

In a double whammy for the stocks, ratings agency Moody's Investors Service warned that the continuing decline in Rupee would be a credit negative event for Indian companies that generate sales in rupees but rely on US dollar debt to fund operations.

An escalating trade war between the US and China continues to weigh down on Asian stocks. On Friday, US President Donald Trump warned the country could move “very soon” to bring another round of tariffs on Chinese imports, which would bring tariffs on all of Chinese imports into the US, intensifying the trade war between the two countries. According to reports, China has also warned of retaliation should the US pursue these harsh measures.