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Indian Stocks Slide Most Since May After Troops Clash With China

(Bloomberg) — Indian stocks slipped, halting a six-day rally, after the government said troops clashed with Chinese soldiers along the disputed Himalayan border. Still, the main equity gauge capped a third straight monthly gain.

Volatility surged as the S&P BSE Sensex slid 2.1%, the most since May 18, to close at 38,628.29 after having advanced 1.4% earlier in the day. The NSE Nifty 50 Index ended 2.2% lower. Sentiment was also impacted due to a decision by India’s market regulator to not extend the Sept. 1 deadline for implementing new rules on margin pledge. Brokers who don’t comply with them from Tuesday will be penalized.

Despite the losses, the Sensex ended August with a 2.7% gain, adding to its 16% surge over the previous two months. Foreign funds have bought a net $6.4 billion of Indian shares this month through Aug. 27, set to be the biggest monthly purchase in a decade.

“The market was in the overbought zone,” said Rahul Sharma, head of research at Mumbai-based Equity99 Advisors. “Geopolitical tensions and the new margin rule requirements from tomorrow provided a reason to sell. Brokers were overactive today to align with the new rules.”

Read: India and Chinese Troops Clash on Disputed Himalayan Border

India’s two main equity indexes have been closing in on record-high levels touched in January after rebounding from a coronavirus-induced sell off in March, even as the nation faces its worst ever quarterly contraction in gross domestic product due to disruptions caused by lockdowns. The economic scorecard is scheduled after markets close today.

Listen: Under the Hood of India’s Record Contraction: Podcast

Along with the economic malaise, coronavirus infections continue to soar, with the South Asian nation reaching a global record for daily cases. Still, almost two-thirds of Nifty 50 index-members that have reported quarterly earnings this season have posted results that met or exceeded analyst estimates.

The yield on India’s 10-year government bonds fell three basis points to 6.12%, with the securities capping their worst monthly decline in more than two years. The rupee weakened 0.3% to 73.62 per U.S. dollar.

READ: RBI Adds Cash, Spurs Banks’ Bond Buying After India Yields Surge

The Numbers

All 19 sectoral indexes compiled by BSE Ltd. fell, led by a gauge of realty stocksReliance Industries contributed the most to the Sensex decline; the nation’s most-valuable company said it is buying assets of debt-strapped rival Future Group for 247.1 billion rupees ($3.4 billion). Sun Pharmaceutical Industries Ltd. had the largest drop, falling 6.7%

Market-related stories

India Faces Worst Quarterly GDP Slump Ever After Lockdown India Becoming Virus Hotspot to Watch With Cases to Top BrazilReliance Buys Future Assets for $3.4 Billion; Bonds Jump (1)

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