Indian shares erased early gains on Monday as escalating Sino-U.S. trade tensions overshadowed enthusiasm about the withdrawal a recent tax surcharge on foreign investors and faster capital infusion into state-run banks.
Stock indexes swung between gains and losses after an initial surge, with the broader NSE Nifty shedding 0.54% to 10,780.75 as of 0440 GMT, while the benchmark BSE Sensex fell 0.47% to 36,564.39.
Other Asian markets slumped as deteriorating trade relations between the United States and China shook confidence in the world economy and sent investors steaming to the safe harbours.
China’s yuan slumped to a fresh 11-year low against the dollar on Monday and stocks fell as the trade war escalated.
On Friday, Finance Minister Nirmala Sitharaman outlined a raft of measures in an attempt to lift consumer sentiment and promised more actions soon to revive slowing economic growth.
“Markets acknowledges that more needs to be done by the government and are now waiting for future announcements,” said Anand James, chief market strategist at Geojit Financial Services.
India, Asia’s third-largest economy, is facing a slow growth that has dampened demand for everything from cars to cookies, and a poorly received budget proposal on higher taxes for foreign portfolio investors contributed to a selloff in the markets.
“Friday’s announcement is a turning point for domestic market. It could have been better if the global factors were also accommodating,” said Sunil Sharma, chief investment officer at Sanctum Wealth Management in Mumbai.
“The development with U.S.-China is an overhang.”
The India volatility index plunged as much as 21% to its lowest over three weeks.
The Nifty PSU bank index that tracks state-owned lenders rose as much as 6.47%, with a 3.8% rise in State Bank of India.
Shares of Yes Bank Ltd and Indiabulls Housing Finance Ltd were among the top gainers on the NSE Nifty, rising over 3% each.
The Nifty Auto index rose as much as 3.07% but gave up the gains to trade 1.5% lower by 0447 GMT
The rupee fell to 72.08 against the dollar, its lowest since Dec. 12, versus Friday’s close of 71.655.
Shares of miners Vedanta Ltd and Tata Steel Ltd were among the top losers on the NSE Nifty, down 3.5% and 3.2% respectively.