Indian equities may fall further on Tuesday as global markets sink deeper into losses.
Global stock markets extended their already substantial losses, while the offshore yuan hit an all-time low on Tuesday after Washington designated Beijing a currency manipulator in a rapid escalation of the US-China trade war.
US Treasury Secretary Steven Mnuchin said on Monday the government had determined that China was manipulating its currency, and that Washington would engage the International Monetary Fund to eliminate unfair competition from Beijing.
The Trump administration's dramatic move against China deepened the risk aversion seen in global markets this week. On Monday, China let the yuan slide in response to the latest round of tariffs from the US, which will aggravate trade tensions between the world's two largest economies.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.75% on Tuesday to its lowest since January. Japan's Nikkei shed 2.7%, Australian stocks fell 2.6% and South Korea's KOSPI slid 1.5%.
S&P 500 futures fell 1.3% in early Asian trade. Overnight, Wall Street's major indexes posted their biggest percentage drop of the year on fear of escalation in the U.S.-China trade war.
MSCI's All Country World Index , which tracks shares in 47 countries, extended last week's slide, slumping 2.5% to a two-month low on Monday.
China's offshore yuan stretched the previous day's big slide and weakened to 7.1288, a fresh record low since international trading on the Chinese trade began in 2010. The yen, a perceived safe-haven in times of market turmoil and political tensions, was up 0.1% at 105.850 per dollar after touching a seven-month high of 105.520.
Investor demand for other safe-haven assets such as government bonds also remained high as risk aversion gathered momentum. The 10-year US Treasury yield extended sharp falls overnight and declined to 1.672%, its lowest since October 2016.
The Indian rupee on Monday weakened the most since September 2013. The rupee ended at 70.74 a dollar, down 1.6%, its steepest fall since 3 September 2013, from its Friday’s close of 69.60.
The local currency had opened at 70.06 and touched a low of 70.72 a dollar. So far this year, it has declined 1.3%.
Meanwhile, finance minister Nirmala Sitharaman said on Monday that the government plans to take policy measures “fairly quickly" to address the challenges plaguing the industry. She also said the government was open to hearing out the grievances of foreign portfolio investors (FPIs).