Indian shares joined a global selloff in equities and commodities after the U.S. Federal Reserve signaled it is moving closer to slowing the pace of bond purchases later this year as long as the economy sustained its improvement.
Fed Chairman Ben Bernanke indicated that the $85 billion-a-month bond-buying program may end altogether by mid-2014 if the economy performs in line with Fed projections.
Bernanke's remarks were more explicit than markets had expected, stoking concerns that capital outflows could accelerate. The Indian rupee slumped to a record low of 60 per dollar, prompting the government to reassure that it is ready to take steps to curb volatility in the forex market.
Asserting that rupee is not in 'shambles,' Chief Economic Advisor to the Finance Ministry Raghuram Rajan said that the government and the RBI would take necessary action to support the rupee. There will be improvement in the current account deficit in June as gold imports are coming off its peak, he said. Earlier, Finance Minister P. Chidambaram reportedly held a meeting with his ministry officials about the rupee fall.
The benchmark BSE Sensex tumbled 526 points or 2.74 percent to 18.719, while the broader Nifty index plunged 166 points or 2.86 percent to 5,656, marking their steepest falls in 16 months.
Banks saw heavy selling as surging yields on government bonds on the back of rising inflation expectations dampened hopes for fresh monetary policy easing in the coming months.
SBI lost 2.3 percent, while Axis Bank, ICICI Bank, Yes Bank and HDFC Bank fell about 4 percent each. Auto stocks also bore the brunt of the selling, with Bajaj Auto, Tata Motors, Maruti Suzuki, Hero Moto Corp, and Mahindra & Mahindra losing 1-4 percent.
Metal stocks like Hindalco, Tata Steel and Jindal Steel plunged 6-11 percent on worries over slowing growth in China after preliminary results of a survey by Markit Economics and HSBC showed China's manufacturing activity contracted at a faster pace in June, reducing the prospects of a promising economic recovery. The flash manufacturing purchasing managers' index fell to a nine-month low of 48.3 in June from 49.2 in May.
Jaiprakash Associates and DLF plummeted over 7 percent each. Wipro bucked the downward trend to end 0.7 percent higher amid reports it has bagged a large technology outsourcing contract worth Rs 2,900 crore from Citigroup. Tourism Finance Corporation soared 11.4 percent after its board approved a proposal to seek license from the Reserve Bank of India for setting up a bank.
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Market Analysis
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.