The growing fear of Coronavirus has sent the global stock market into a frenzy with a drastic fall in prices and violent sell-off. India’s rupee received a sudden shock when oversees investors left the national stock market amid Coronavirus concern. Foreign investors have pulled around $4 billion from the Indian market since last week of February. The massive decline in the foreign reserve made the Indian rupee plunged to an all-time low. The INR registered 74.5 to 1 US dollar on Friday.
India has reported 74 cases of coronavirus infection so far, however, due to an improvised healthcare system and weak economy, the foreign investors have fled India’s stock market. The collapse of a major bank in India also contributed to making the economic slowdown worse.
While INR is still not showing any sign to rebound against USD, in a statement to FT, an analyst at Motilal Oswal said, “The rupee was quite immune to what was happening globally. And we’re seeing some kind of panic starting to build in”
Before the global slowdown and crash of equity market caused by the Coronavirus pandemic, the Indian economy is suffering from economic slowdown and low GDP growth. The current slowdown has put additional pressure on the Indian government to save the financial system from weakening further.
The major crash of INR led the Reserve Bank of India, a national bank, to announce that if INR continues to fall, it would sell its dollar reserves in an attempt to improve the value of its currency in the global market.
The national stock market’s Nifty fell over 4 percent after opening the market on Friday as the Indian government suspended all visas to foreign visitors for the short-term. Although the Coronavirus proved to be a blow to the already debt-ridden Indian economy, the central government has not yet come up with a plan to fight this chronic outbreak and mitigate its impact on the financial system.