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Indian shares, rupee plunge as Syria tensions grow
September 3, 2013, 5:26 pm

The Indian rupee and stock markets plunged on Tuesday, with benchmark Sensex crashing by 650 points on reports that missiles were fired at Syria, raising fears of disruption in oil supply and spike in prices. The Indian rupee slipped below 68 against a dollar, losing more than two per cent of its value in the day trade.

Rupee closed at 67.63 to a dollar. It had touched a record low thus far of 68.80 against the dollar on Aug 28.

The 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 19,002.77 points, closed at 18,234.66 points, crashing by 651.47 points or 3.45 per cent from the previous day's close at 18,886.13 points.

The Sensex touched a high of 19,007.31 points and a low of 18,166.17 points during trade so far.

The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) also slumped 3.77 per cent or 209.30 points at 5,341.45 points.

Concerns have been raised over escalation in tensions in Syria with a possible US intervention and, thereafter, the fallout on oil prices. India currently imports almost 79 per cent of its total crude oil requirements.

Increase in price of crude oil due to the Middle East crisis will further lead to widening of India's current account deficit (CAD).

According to the current estimates, for 2013-14, the three state-owned oil marketing companies (OMCs) are slated to incur under-recovery of Rs144,000 crore on sale of three sensitive products.

The OMCs incurred under-recovery of Rs161,029 crore during 2012-13 and Rs25,579 crore during April-June 2013.

'A combination of sell-off in leading emerging market currencies and fresh jitters in the Middle East has been driven rupee lower. Indian equity market suffered a steep sell-off, with leading indices dropping close to four percent,' said Anindya Banerjee, currency analyst at Kotak Securities.

'Over the near-term, fears of US Fed tapering and tensions in Middle East could put rupee under pressure, with risk emerging for a sell-off beyond 69.00 levels on spot.”

In Tuesday's trade, stocks of companies in sectors like banking, oil and gas declined after the Russian defence ministry announced that it has detected launch of two ballistic missiles from the central part of the Mediterranean Sea toward the eastern part of the Mediterranean coast.

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