Indian shares slumped to two-month lows, dragging the rupee to five-week lows on Tuesday, as investors reshuffled their portfolios ahead of the fiscal year-end and worried about a broadly firmer dollar. The 30-share Mumbai Stock Exchange index shed more than 2 percent to 6,367.86 points, its lowest close since January 28 and down more than 8 percent from all-time highs set on March 9. Reliance Industries Ltd, which has an 11.16 percent weightage on the Bombay index, fell 3.2 percent.
"There is a year-end churning of portfolios, plus regional markets were very weak, and domestic funds and retail buyers are staying out of the market, so there was no buying support," said Mitesh Mehta, vice president of equity sales, LKP Shares.
The dollar hit five-month highs against the yen on Tuesday and set six-week highs against the euro on Monday, and market watchers fear its strength may spark a flight of foreign funds from emerging markets.
Those concerns, which have been heightened after the Federal Reserve signalled that US interest rates could start rising faster, also weighed on the Indian currency, which has been supported by strong inflows of foreign capital.
Federal bonds were weighed down after the central bank said late on Monday the government planned to borrow 830 billion rupees ($19 billion) over the first six months of the next fiscal year - more than the 803.5 billion raised in the current year to March 31.
The yield of the 10-year benchmark bond ended at 6.6668 percent on Tuesday, higher than Monday's 6.6462 percent.