It was another bloodbath on the stock markets. Key equity indices reacted to weak global cues, Fitch Rating?s downgrade of Indian currency, the political uncertainty in New Delhi and worsening inflation, ending the day at their 15-month low. The 30-share Sensex of the BSE closed at 12,676.19 points, losing 654.32 points, or 4.91%. The broader S&P CNX Nifty of the NSE shed 202.50 points, or 5.01%, before ending the day at 3,837.20 points.
Analysts attributed Tuesday?s downfall to negative sentiments across the globe. Banks were the worst hit on the BSE. Most bank stocks took huge beatings worldwide on fears of further bank failures in the US. All BSE sectoral indices ended the day in negative terrain. Political uncertainty in the country also played a key role in the downfall, said a market analyst.
Amitabh Chakraborty, president-equities, a broking firm Religare Securities, said, ?The plunge in the markets can be credited to the overall uncertainty in the financial sector globally. Financial companies in US are facing some problems, so we expect this had a negative impact on Indian companies, too. Apart from that, we saw some heavy selling not only in banking stocks but across the board by FIIs.?
?We also think that the markets have bottomed out and stability will be seen in the equity markets soon,? he added.
FIIs have withdrawn Rs 29,194 crore from the equity market since the Sensex touched its peak in the current calendar year at 20,873 points on January 8 to date. However, domestic mutual funds were net buyers at Rs 5,459 crore during this period.
Phani Sekhar, fund manager, Angel Broking, said that the sub-prime mortgage crisis has been responsible for the foreign funds? outflow from the domestic market. The changing global and the domestic economic scenario, clubbed with the political uncertainty in Delhi, has further influenced FIIs to withdraw money from the Indian equity market.
The Sensex has dipped 39%, or 8,197 points, and the Nifty shed 39%, or 2,426 points, between January 8 and July 15. On the BSE, 2,105 stocks declined, 535 stocks advanced and 57 remained unchanged. All the constituents of the 30-share Sensex declined.
FIIs were net sellers at Rs 702.70 crore and domestic institutional investors were net buyers at 283.40 crore on Tuesday. Market analysts added that the markets would remain volatile until July 21-22, when the UPA government seeks a vote of confidence in the Lok Sabha.
Fitch downgrade
Fitch Ratings on Tuesday revised its outlook on the country?s long-term local currency to negative from stable, while affirming the rating at ?BBB-? on Tuesday. Fitch said the central government?s deficit might increase to 4.5% of the gross domestic product (GDP) in 2008-09, from 2.8% in 2007-08, based in part on higher on-Budget subsidies, interest payments and public wages. The agency expects bonds issued to oil and fertiliser companies to reach at least 2% of GDP this year, implying an underlying central government deficit of 6.5% of GDP or higher.