India rupee bundles
The Indian rupee suffered on the global market after the largest fall on India's stock exchange since 2008Reuters

A rout of Chinese stocks that saw the Shanghai index lose all the gains it made in 2015 has rippled outward to knock 6% from India's Sensex index, its biggest fall since 2009. The Sensex, a Mumbai exchange that is the pulse of India's domestic stock market, lost over 1,700 points at one point in trading on 24 August. In parallel, the Indian rupee reached its lowest point in the past two years at 66.7 to one US dollar.

August has marked the largest devaluation of the rupee against the dollar in the past year. Many are calling the losses precipitated by the steep fall in the value of Chinese equities "Black Monday".

The Indian index began the day trading at 26,730.40 but by the end of the day had fallen to 25,741.56, with a difference of 1,624.51, or -5.94% of its value. The market's property, power, oil and gas, metal, capital goods and IT sectors, among others, were all touched by heavy selling.

India's Reserve Bank (RBI) governor Raghuram Rajan sought to dampen fears regarding the large single-day loss. "I wish to reassure the markets that our macroeconomic factors are under control as the economy is in a much better position relative many other economies," he told a national banking summit on 24 August. He said the country has $380bn in forex reserves that can be deployed if the need arises.

China stock market crash explained in 90 secondsIBTimes UK

"We need to assess to what extent global factors can impact our economy. Our economy is on the path of recovery albeit slower than earlier expected," market analyst Ambareesh Baliga said. Anticipating carnage on the market, Baliga wrote a blog post on 23 August noting "the RBI may have to reluctantly step in to support any sharp fall of the currency",

Baliga speculated that calls for an interest rate cut in India may get louder as a result of the losses. The converging events indicate "it's time for long-term investors to slowly nibble in", he said. The thinking of other Indian analysts appear to be in line with this track.

Rajan did not rule out a rate cut as a tool to soften the blow. He said: "Falling commodity prices and astute food management by the government should help RBI (lower rates)."