Sensex plunges 189 pts as rupee nears 2-year low

India's benchmark stock index dropped after its steepest rally in three months, as the rupee approached a two-year low amid a slump in the nation's exports.

Cipla, one of the country's four biggest pharmaceutical companies, slid from a record. Vedanta and Hindalco Industries, the top copper and aluminum makers, declined at least two per cent. Reliance Industries lost 1.7 per cent and Oil & Natural Gas Corp. plunged to a two-year low.

The benchmark BSE Sensex lost 189 points, or 0.7 per cent, to close at 27,878.27. The gauge on Friday capped its biggest two-day gain in more than a month after the nation's two main inflation gauges slowed more than estimated, bolstering expectations of a cut in interest rates. Exports dropped for an eighth month, the longest stretch since 2009, official data showed after market hours on Friday.

The 50-share National Stock Exchange's Nifty, which broke below the crucial 8,500-mark, settled lower by 41.25 points, or 0.48 per cent, at 8,477.30.

"Some investors are taking money off the table after the superb rally on Friday," Alex Mathews, the head of research at Geojit BNP Paribas Financial Services, said by phone from Kollam in the southern state of Kerala. "The rupee is down and that's not helping."

India's trade gap widened to $12.8 billion last month as exports fell 10.3 per cent from a year earlier, data showed. The rupee weakened 0.5 per cent to 65.3375 per dollar at 3:51 pm in Mumbai. The currency touched 65.3050 on Friday, the lowest level since September 2013, as China's yuan devaluation stoked concern of a regional currency war.

"The mood is cautious, as there are concerns that yuan might be devalued more," said Mathews.

Earnings scorecard
Cipla tumbled 4.9 per cent in the worst performance on the Sensex on Monday. However, its first-quarter net income more than doubled to Rs 651 crore ($100 million), beating the Rs 425 crore estimate, the company said after market hours on Friday.

Quarterly earnings at 18 of the 30 Sensex companies, or 60 per cent, matched or beat estimates in the June quarter, versus 40 per cent in the March quarter.

Bank of Baroda soared 15 per cent to a six-month high after the government said after trading ended on Friday that it would inject $3.1 billion into state-run banks. Canara Bank rose 13 per cent, the most since May 2009, while Bank of India soared 9.1 per cent, the most since October 2013.

International investors sold a net $76 million of Indian stocks on August 13, paring this year's inflows to $6.9 billion.

The Sensex has increased 1.4 per cent this year and trades at 15.7 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.