Investors sold equities to take profits amid growing concerns of a weak monsoon that could result in crop failure, stoking fears of further slowdown in growth and spike in inflation. The 30-share Sensex of Bombay Stock Exchange (BSE) dropped 150.47 points, or 0.99%, to end the trading session at 15,009.77 points while the broader 50-share Nifty of National Stock Exchange (NSE) closed at 4,437.65 points, losing 0.98%, or 43.75 points.
Other Asian stocks, however, rallied as a better-than-expected US jobs data for July bolstered sentiments in the global markets towards recovery. Key Asian equity indices such as Nikkei 225, Hang Seng and Jakarta Composite were up in the range of 1.02% and 2.72%. In India, besides worries over monsoon, the spread of Swine flu weighed heavily on investor sentiments.
?The immediate concern before the market is the failure of monsoon that could have an impact on our GDP and corporate earnings. If the situation worsens, market participants fear that the planned government spending towards our infrastructure sector considered as the growth engine could be diverted towards agriculture that can have an impact on a speedier economic recovery that the market anticipates,? said Harjit Singh Sethi, country head ? institutional equity broking at Almondz Global Securities Ltd.
A note issued by Goldman Sachs last week to its clients said that the overall shortfall in rain over the June-September period could rise to 15 – 18% from the current 8% forecast by the meteorological department. ?We estimate that this could reduce agriculture growth to negative 2% year-on-year, the direct effect of which could shave off 0.3% point from GDP growth.?
On Monday, the market breadth, an indicator of the broader sentiments on the bourses, was negative with 1,800 stocks declining as compared to 850 stocks that advanced. According to the provisional figures released by stock exchanges, foreign institutional investors (FIIs) were net sellers to the tune of Rs 639.92 crore while domestic institutional investors (DIIs) such as insurance companies and mutual funds were net buyers of equities worth Rs 86.14 crore.