Markets spring back after the political jolt

Written by Markets Bureau | Mumbai, Jul 8 | Updated: Jul 9 2008, 06:04am hrs
Equities plunged on Tuesday after the Left parties withdrew their support to the UPA government at the Centre, but recovered after the main coalition partner, the Congress, assured political stability. Nevertheless, nervousness prevailed in the market throughout the day.

The 30-share Sensex of the Bombay Stock Exchange finally shed 1.3%, or 176 points, from the previous day to close at 13,349 points. Similarly, the S&P CNX Nifty of the National Stock Exchange lost 1.03%, or 41.45 points.

The stock market was still in the grip of high crude oil prices and inflationary pressures, rather than the short-lived political uncertainty. Shares continued to respond to developments in the moribund US market.

The Sensex opened on a weak note at 13,292.80 points and touched its intra-day lowest at 13,049 points in the afternoon following the Left parties meeting to decide on support to the UPA government over the Indo-US nuclear deal. An announcement by Prakash Karat, general secretary of the main Left constituent, the CPI(M), threw the bourses into jitters and the two major indices started heading southward.

The markets, however, recovered almost 402 points after hearing from Congress leaders that there is no threat to the government because the Samajwadi Party had pledged its support to the UPA. As TV channels flashed SP leaders statements, investor sentiment received a boost.

Vinay Mehta, managing director of Almondz Global Securities, said the Lefts withdrawal of support was on expected lines. There will be a problem if SP backtracks on its commitment to support the government in the coming days, he said.