MUMBAI : Indian equity markets and the rupee fell on Monday amid political uncertainty in Jammu and Kashmir. The Indian currency also declined in the backdrop of speculation that Beijing may allow currency depreciation to counter US President Donald Trump’s latest tariff threat.

At 10am, the benchmark equity index Sensex slumped 1.7% or 621 points to 36,497.33, while Nifty declined 1.8% or 194 points to 10,803.90 points.

The rupee slipped 1.25% to 70.48 a dollar, its steepest fall since 11 December 2018. It closed at 69.60 on Friday. The domestic currency opened at 70.06 and touched a low of 70.60 a dollar. So far this year, it has declined 0.2%.

While there has been no direct statement from the Centre so far, all eyes will be on home minister Amit Shah’s visit to Kashmir in the wake of massive troop deployment in the Valley.

According to Sahaj Agarwal of Kotak Securities, Nifty breached a critical support of 11,000 points in the previous week. This indicates a lack of momentum in the markets and implies significant increase in downside risk. Next support is seen at 10,800 on monthly basis. Volatility is likely to persist in the near term. On the higher side, resistance is seen at 11,100. Midcap stocks have underperformed significantly in the recent past, and this is expected to continue.

The yuan plunged beyond 7 per dollar for the first time since 2008 after Trump abruptly escalated the trade war with new tariffs on Chinese goods. Beijing pledged to respond if the US goes ahead with a plan to impose a 10% tariff on a further $300 billion in Chinese imports.

"First, the Fed became the second major Central Bank (after ECB last week ) to disappoint markets, as it delivered a less than dovish cut of 25bp. To add to the woes, Trump announced another round of tariffs on the last remaining tranche of Chinese imports. China has already warned of retaliation and now all eyes will be on how China reciprocates, and everything else will likely take a backseat for now, in our view," said Nomura Research in a note.

"Geopolitical and trade tensions continue to rise, with the US withdrawing from a nuclear treaty with Russia , North Korea conducting another missile test, and Japan-South Korea threatening to remove each other from trade whitelists, which could further dampen the growth outlook for the region," Nomura Research added.

Reliance Industries Ltd shares fell 3% after brokerage and research firm Credit Suisse downgraded it to ‘underperform’ from ‘neutral’, and cut price target to 995 from 1,350.

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