Sensex slumps over 1 percent, heads for lowest close in two months

MUMBAI (Reuters) - India's stock market fell about 1.5 percent on Friday, with the Sensex heading for its lowest close in two months, as fears of a China-led deceleration in global growth and escalating tension between South Korea and North Korea gripped markets.

Global stock markets tumbled after a survey showed Chinese factory activity contracted at their fastest pace since the depth of the global financial crisis in 2009.

The rupee too touched a low of 65.90 per dollar, the lowest since September 2013, tracking selloff in other Asian currencies.

"We've broken crucial levels, we could see a small pullback next week but sustainability is going to be a big question mark," said Gaurang Shah, vice president at Geojit BNP Paribas.

 

"No positive news flows either from global or local markets should keep the markets suppressed."

The Sensex was down 1.38 percent, heading for its lowest close since June 18, while the Nifty fell 1.4 percent.

Almost all sectors languished in the red, with financial and auto and auto-ancillary stocks suffering the biggest cuts.

Housing Development Finance Corp fell 2.3 percent, HDFC Bank dropped 1.6 percent and ICICI Bank declined 1.3 percent.

Tata Motors fell 3.3 percent, extending losses into a second session, after the company said some Jaguar Land Rover vehicles may have been damaged in the Tianjin explosions on Aug. 12.

Meanwhile, Infosys gained 0.75 percent on short-covering.

(Reporting by Karen Rebelo; Editing by Subhranshu Sahu)