The RBI and SEBI on Sunday said they are “closely monitoring” the recent developments in the financial markets and are “ready” to take appropriate actions if necessary.

The observation comes in the wake of a host of developments in the financial markets including at the cash-strapped IL&FS Group, volatile equity markets, rising bond yields and a depreciating rupee.

One of the biggest worries for the financial system is the ripple effect that delayed repayment on commercial papers by IL&FS Financial Services and default on inter-corporate deposits raised by IL&FS from SIDBI could have on mutual funds and banks. IL&FS Group’s outstanding borrowings as at March-end 2018 stood at about ₹91,000 crore, against about ₹80,000 crore as at March-end 2017.

Last Friday, the equity markets sank, with the bellwether BSE Sensex plunging 1,128 points intra-day before recovering to close down 280 points. Stocks of NBFCs and housing finance companies primarily dragged the market down due to reports that they would face liquidity and margin pressures in the current rising interest rate cycle.

 

Investors nervous

Overseas investors have pulled out a massive ₹15,365 crore ($2.1 billion) from the capital markets so far in September, after putting in funds during the previous two months, on widening current account deficit coupled with global trade tensions.

Foreign portfolio investors remained net sellers and offloaded equities worth ₹2,184.55 crore while domestic institutional investors made purchases worth a net ₹1,201.30 crore on Wednesday, provisional data showed.

The rupee has also witnessed a massive plunge in the recent past.

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