The rupee fell past 64 to the dollar for the first time on Tuesday and bond yields spiked to a five-year high before the RBI stepped in to sell dollars, as Asia's third-largest economy bore the brunt of the global emerging markets selloff.
Underscoring how hard it is for New Delhi to push through reforms despite the urgency of a deteriorating economic outlook, Parliament was adjourned on Tuesday due to protests by members over a corruption scandal.
Later on Tuesday, India was due to hold a $9.3 billion sale of government debt quotas, a gauge of foreign investor interest in local assets. Bankers said that the debt limits at the auction may get taken up, but at rock-bottom prices.
Foreigners have unloaded about $10 billion in Indian debt since May 22, when the U.S. Federal Reserve first signaled its intention to begin scaling back its quantitative easing. They now hold only 43 per cent of the $30 billion limit available to them in Indian government debt.
The rupee slumped as much as 1.6 per cent to 64.13 to the dollar, adding to its 2.3 per cent rout on Monday, before traders said the central bank was seen stepping in to sell dollars.
Later, the Reserve Bank of India was believed by traders to be selling dollars in the forward market, a move that helps it support the rupee without immediately expending its reserves.
Stocks extended declines, with the Sensex falling as much as 1.8 per cent to a near-year low. JPMorgan downgraded Indian equities to "neutral" from "overweight", citing strains in the country's balance of payments, while Citi cut its Sensex target to 18,900 from 20,800.
Selling of dollars by the RBI helped the partially convertible rupee recover somewhat to 63.65 to the dollar.
Bond yields spiked to 9.48 per cent, a level not seen since before the Lehman Brothers crisis in 2008 before stability in the rupee helped them recover. Yields were last down 19 basis points (bps) on the day at 9.04 per cent
Underscoring how hard it is for New Delhi to push through reforms despite the urgency of a deteriorating economic outlook, Parliament was adjourned on Tuesday due to protests by members over a corruption scandal.
Later on Tuesday, India was due to hold a $9.3 billion sale of government debt quotas, a gauge of foreign investor interest in local assets. Bankers said that the debt limits at the auction may get taken up, but at rock-bottom prices.
Foreigners have unloaded about $10 billion in Indian debt since May 22, when the U.S. Federal Reserve first signaled its intention to begin scaling back its quantitative easing. They now hold only 43 per cent of the $30 billion limit available to them in Indian government debt.
The rupee slumped as much as 1.6 per cent to 64.13 to the dollar, adding to its 2.3 per cent rout on Monday, before traders said the central bank was seen stepping in to sell dollars.
Later, the Reserve Bank of India was believed by traders to be selling dollars in the forward market, a move that helps it support the rupee without immediately expending its reserves.
Stocks extended declines, with the Sensex falling as much as 1.8 per cent to a near-year low. JPMorgan downgraded Indian equities to "neutral" from "overweight", citing strains in the country's balance of payments, while Citi cut its Sensex target to 18,900 from 20,800.
Selling of dollars by the RBI helped the partially convertible rupee recover somewhat to 63.65 to the dollar.
Bond yields spiked to 9.48 per cent, a level not seen since before the Lehman Brothers crisis in 2008 before stability in the rupee helped them recover. Yields were last down 19 basis points (bps) on the day at 9.04 per cent
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