Indian Stock Market Plunges 650 Points as Nifty Slips Below 23,700

Indian Equities Pare Early Gains Amid Profit Booking and RBI Rate Hike Considerations

The benchmark equity indices Sensex and Nifty retreated from their early gains on Thursday, as investors booked profits following a report that the Reserve Bank of India (RBI) is considering various measures, including a possible interest rate hike, to stabilize the rupee.

The Sensex had surged 627.4 points or 0.83 percent to 75,945.79 in early trade, while the broader Nifty advanced 200.9 points or 0.84 percent to 23,859.90. However, by 11:30 am, the domestic equity markets gave up a significant portion of the gains, with the Sensex trading at 75,367.95, up 49.56 points or 0.066 percent, and the Nifty quoted at 23,708.20, up 47.55 points or 0.21 percent.

RBI Considers Interest Rate Hike to Stabilize Rupee

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The RBI is reportedly considering all available options to stabilize the rupee, including an interest rate hike, additional currency swaps, and raising dollars from overseas investors. Top RBI officials, including Governor Sanjay Malhotra, have held internal meetings to discuss possible policy measures after the rupee touched a fresh low of nearly 97 against the US dollar this week. The next scheduled monetary policy announcement is on June 5.

A rise in interest rates generally impacts equity markets negatively, as borrowing costs for companies increase and investor sentiment weakens. Higher rates also tend to reduce liquidity in the financial system and make fixed-income investments more attractive compared to equities.

Profit Booking and Persistent FII Selling Weigh on Markets

Profit booking emerged at higher levels after the initial rally in the market. On Wednesday, the Sensex climbed 117.54 points or 0.16 percent to settle at 75,318.39, while the Nifty edged up 41 points or 0.17 percent to close at 23,659. Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,597.35 crore on Wednesday, weighing on domestic equities and impacting overall market sentiment.

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Weak Global Cues Add to Market Uncertainty

In Asian markets, Shanghai's SSE Composite index traded lower, while Hong Kong's Hang Seng index was marginally down. Wall Street futures were also trading lower, indicating a weak opening for the US markets.