The rupee in the non-deliverable forwards (NDF) market fell to Rs 72.81 against the US dollar — down 1.7 per cent. The data is till 10 pm, Monday. The Sensex on Monday fell 713 points, or 2 per cent, to end at 34,960, its lowest close in more than a month. The markets had weakened because of a possible setback for the ruling Bharatiya Janata Party (BJP) in the state polls and weakness in the global markets amid escalation of tensions between the US and China. The Nifty ended at 10,488, down 205 points, or 1.92 per cent, while the rupee had closed at 71.33 against the previous day’s close of 70.81.
The yield in the 10-year government bond hardened to 7.59 versus the previous close of 7.45.
Even ADRs of leading Indian companies took a knock. Tata Motors, HDFC Bank, ICICI Bank and Vedanta were down over 5 per cent. Dr Reddy's Lab, Wipro, Eros International and Infosys fell 2-3 per cent.
"The markets will quite obviously react badly because this is very big and unsettling news. I suspect markets will take a while to come back to normalcy," said Shankar Sharma, co-founder, First Global. Market experts say the resignation couldn't have come at a worse time for the market.
"This has come at a very sensitive juncture, given the geopolitical situation and the jitteriness around Assembly poll results.
This will be difficult news for the market to digest," said Saurabh Mukherjea, founder, Marcellus Investment Managers. ALSO READ: Urjit Patel's resignation disturbing, can impact top RBI team
Terming the resignation an unprecedented event, U R Bhat, director, Dalton Capital Advisors said: "I expect the market downturn to extend further. If election results are not favourable, it could further intensify the sell-off."
Exit polls suggest that the BJP faces tough fight from the Congress in Madhya Pradesh, Chhattisgarh, and Rajasthan. The actual results will be announced during market hours on Tuesday.
Investors are taking cues from these elections to gauge what will happen in next year's general elections.
"Notwithstanding these opinion polls, we expect political uncertainty to hit a feverish pitch in January-April, as the risk of non-BJP parties coalescing to compete against the BJP will keep the tail risk elevated. We expect this to affect capital inflows during this period adversely," said foreign brokerage Nomura in a note. ALSO READ: Urjit Patel, the RBI Governor with few spoken words but tall actions
All Sensex constituents, barring two, ended with losses. Realty stocks fell the most followed by telecom and energy. Among Sensex constituents, Kotak Mahindra Bank fell 6.6 per cent, Reliance Industries nearly 4 per cent, and Asian Paints declined 3.5 per cent.
Market players say any weakness in the rupee and bond markets could spook foreign institutional investors whose appetite for risk was just seen improving.
"The rupee has already weakened in the NDF market. This is a terrible thing. After the last battle, it was clear that something like this could happen. How can a self-respecting person stay on when being pushed around in this fashion?," said Jamal Mecklai, CEO, Mecklai Financial Services.ALSO READ: