Sensex Plunges 537 Points On China, Middle East Worries

(RTTNews) - Indian shares slumped on Monday, tracking a weak trend in other Asian and European markets after a seven percent fall in Chinese equities prompted exchanges in China to halt trading.

China's Shanghai Composite index plunged 6.86 percent on the first trading day of 2016, sparking a trading halt for the rest of the day. It was the first time China used a newly launched circuit breaker mechanism to curb market volatility.

Sentiment took a big hit after a private survey showed that activity in China's factory activity contracted for a tenth straight month in December, spurring fresh fears of stalling growth in the world's second-largest economy.

China's central bank set the reference rate for yuan at a more than 4-1/2-year low and relations worsened between Saudi Arabia and Iran over Saudi Arabia's execution of prominent Shia cleric Sheikh Nimr al-Nimr, further dampening investors' appetite for riskier assets.

The benchmark BSE Sensex tumbled 537.55 points or 2.05 percent to 25,623.35 while the broader Nifty index dropped 171.90 points or 2.16 percent to 7,791.30.

The rupee weakened by 44 paise to trade at 66.57 against the dollar in the afternoon after a private survey showed that activity in India's manufacturing sector shrank for the first time in over 2 years.

Financials led losses, with HDFC, Yes Bank, PNB and Bank of Baroda losing 3-5 percent. Automaker Tata Motors tumbled 6.4 percent after reporting a 4 percent decline in December sales.

Telecom majors Bharti Airtel, Idea Cellular and Reliance Communications lost 4-7 percent after sector regulator TRAI wrote to operators to ensure compliance with call drop regulations, effective 1 January.