Trade Deficit Jitters: Indian Markets Slump Amid Export Woes

The Indian stock markets saw declines after weak export data and a surge in the country's trade deficit. The Nifty 50 index dropped by 0.34%, while the BSE Sensex lost 236 points. Economic analysts suggest potential RBI interventions as the rising deficit further jeopardizes the rupee's depreciation.

Indian stock markets commenced Tuesday on a downward spree, driven by disappointing export figures and a burgeoning trade deficit. The Nifty 50 opened at 24,584.80, witnessing a dip of 83.45 points or 0.34%. Simultaneously, the BSE Sensex plunged by 236 points to open at 81,511.

Financial experts have pointed to the escalating trade deficit as the focal point for the market disturbance, sparking speculation over possible Reserve Bank of India (RBI) intervention. The deficit's surge poses significant risks, including a potential depreciation of the Indian rupee, and boosts the probability of a rate cut. Ajay Bagga, a prominent banking and market analyst, remarked on the lack of fiscal or monetary stimulus amid record high trade imbalances.

Bagga criticized RBI's depletion of over USD 50 billion in foreign reserves in a bid to preserve the rupee's value, suggesting an alternative strategy of allowing currency depreciation. He advocates for a rate cut and liquidity measures to rejuvenate economic momentum and enhance trade competitiveness. Amidst sectoral downturns, only Nifty FMCG, Media, and Pharma indices showed early resilience. In contrast, Nifty Bank, Auto, and IT sectors recorded losses during initial trading.

(With inputs from agencies.)