Sensex crashes 285 points on political uncertainties
Mumbai : Indian equities markets’ key indices Tuesday tumbled after the DMK quit the ruling United Progressive Alliance (UPA) over the Sri Lankan issue and the central bank stuck to a cautious approach on monetary policy.
The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened in the positive at 19,345.91 points, ended the day at 19,008.10 points, down 148 percent or 285.10 points from its previous day close at 19,293.20 points.
The market was trading in the positive terrain in the morning session but crashed immediately after the Reserve Bank of India (RBI) announced its monetary policy review and Dravida Munnetra Kazhagam (DMK), a key ally of the ruling UPA coalition decided to quit the government.
The sensex fell below the psychological resistance level of 19,000 points mark and hit a low of 18,939.47 points in the intra-day. The index touched a high of 193,78.61 points in the intra-day trade.
The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) slumped 1.53 percent or 89.30 points at 5,745.95 points.
The DMK has 18 members in the Lok Sabha and five of its MPs are ministers in Prime Minister Manmohan Singh’s council of ministers. The party wants a resolution adopted in parliament declaring there was genocide of Tamils in Sri Lanka.
Sri Lanka is under attack over the death of a large number of Tamil civilians during the final stages of the war that crushed the Liberation Tigers of Tamil Eelam (LTTE) in 2009.
Withdrawal of support by DMK has raised doubts about the fate of the government’s economic reforms agenda and might result in political uncertainty.
The Reserve Bank of India’s (RBI) cautious approach stance on monetary policy also dampened market sentiments.
In a mid-quarter review of the monetary policy for the current fiscal, the RBI cut its short-term lending and borrowing rates by just 25 basis points and left the reserve ratios that also control money available for auto, home or commercial loans unchanged.
There was a heavy selling pressure in interest rate sensitive realty, banking, auto and capital goods stocks.
The BSE realty index tumbled 3.63 percent. Capital goods index slumped 2.69 percent and the banking index closed 1.97 percent down. All the sectoral indices closed in the red.
Major Sensex losers were: BHEL, down 5.05 percent at Rs.186.30; Bharti Airtel, down 4.74 percent at Rs.293.40; Sterlite Inds, down 4.15 percent at Rs.92.40; Jindal Steel, down 3.96 percent at Rs.340.40; Mahindra & Mahindra, down 3.45 percent at Rs.881.35 and HDFC, down 3.01 percent at Rs.784.15.
Only six of the 30 Sensex scrips closed in the positive. Gail India, up 1.96 percent at Rs.320; Bajaj Auto, up 1.17 percent at Rs.1,835.40; Sun Pharma, up 0.74 percent at Rs.838.75 and ITC, up 0.44 percent at Rs.305.45 were among the major Sensex gainers.