India's stocks recovered from a slump that drove the Sensitive Index down almost 10 percent and forced a one-hour trading halt after authorities said curbs on some overseas investment won't lead to a complete ban.
Investors who buy shares anonymously, using derivatives known as participatory notes, will have 18 months to switch to investing directly in the market, the government said today, citing a proposal from the Securities & Exchange Board of India. There is no ``intention to ban issue of such instruments,'' the government said in a statement. The Sensex fell 1.8 percent.
Finance Minister Palaniappan Chidambaram said the rules were aimed at capital inflows that had fueled a ``very steep rise'' in stocks and driven the rupee to a 9 1/2-year high. The controls may stem a record flow of funds that lifted the value of India's stock market 81 percent this year to $1.47 trillion.
``We're talking about a direct restriction on the market, and that's startling,'' said Jo Dong Hyuk, who oversees $2 billion in global equities including Indian stocks at Korea Investment Trust Management Co. in Seoul. ``Foreign money had propped up the stock market, and now this.''
The Bombay Stock Exchange's Sensitive Index of 30 companies, or Sensex, declined 336.04 to 18,715.82 in Mumbai, after earlier falling as low as 17,307.90.
ICICI Bank Ltd., India's biggest lender by market value, fell as much as 12.5 percent closing 3.5 percent lower at 1,116.85 rupees. Housing Development Finance Corp., the nation's biggest mortgage lender, dropped 4 percent to 2,469.55 rupees, rebounding from an 8.5 percent slump.
The rupee weakened 0.5 percent to 39.565 against the dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency earlier fell as low as 39.97. Today's decline was the biggest since Aug. 16. The currency reached 39.27 on Oct. 11, the highest since February 1998.
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