Sensex dropped 554 points to trade below the 25,000 mark and finally close at 24,851.83. This is the lowest closing that the Sensex has recorded in the last one and a half year. The Nifty too shed 173 points to end the day at 7568.30. This is the fourth straight day that both these indices extended their losses.
The rupee further weakened against the US dollar, making matters worse.
Shanghai experienced the shortest trading day in its history as shares crashed over 7 per cent within the first 30 minutes of trading, triggering an automatic “circuit breaker”, after which trading was suspended. Yuan too slid to its weakest mark since 2011.
The indices crashed after fear sparked by reports that the world’s second largest economy was headed for a further slowdown.
The benchmark Shanghai Composite Index was down 7.32 per cent to close at 3,115.89 points. The smaller Shenzhen index lost 8.35 per cent to close at 10745.47 points.
The yuan too depreciated to its weakest point in nearly 5 years. The yuan’s central parity rate lost 332 basis points to 6.5646 against the US dollar, the lowest level since March 18, 2011. It was the biggest drop in yuan since August 2015 when Beijing depreciated its currency by nearly five percent in a week.
On Thursday morning, trading in China was suspended for the second time this week. Two days ago, on Monday, a similar plunge triggered the circuit breaker, the first day the mechanism came into effect.
The mechanism follows the Hushen 300 Index, which reflects the performance of bluechips listed in Shanghai and Shenzhen. When the index rises or falls by 5 per cent, the circuit breaker imposes a 15-minute suspension in trading. If the Hushen 300 declines by over 7 per cent, trading is halted for the day.
At 9:42 am, trading was suspended for 15 minutes after the Hushen 300 dropped by over 5 per cent. The index dived a further 2 per cent in just 2 minutes after reopening at 9:57 am and trading was ceased.
The stock market “circuit breaker” was put into effect at the beginning of the year as part of efforts to reduce volatility on Chinese stocks which plummeted in mid-2015, sending jitters through world markets.
In 2015 the Chinese economy grew at its slowest pace in more than two decades.
(With inputs from PTI)