India’s latest attempt to stem the flight of western funds from its markets today looked doomed to fail as the country’s stock market and currency resumed its slide.
The country’s central bank, soon to be led by new governor Raghuram Rajan, said it would start buying government debt in a bid to support its stricken currency, reduce bond yields and pump funds into markets.
India’s Sensex stock market initially rose today in reaction, but that was quickly replaced by a new wave of selling. The rupee also resumed its slide. Bond yields fell sharply from yesterday’s highs of 9.48% on 10-year debt, although even that drop began to lessen later in the day. Investors have now pulled about $12 billion (£7.7 billion) from Indian stocks and bonds since May, when US Federal Reserve chairman Ben Bernanke started the rout by announcing that he was now minded to start tapering down its $85 billion a month quantitative easing policy.
Alex Mathews, head of research at Geojit BNP Paribas said: “The Reserve Bank of India measures have not been able to support the rupee, and that is prompting some investors to book profits.”
The Sensex index today reversed initial gains to fall 2%, although Indonesia’s Jakarta Composite index, which has been particularly hard-hit in the past week, rose 1%.
The FTSE 100 index was down 33.48 points at 6419.98.
