The benchmark indices fell for a fifth session in a row on Tuesday, dropping 1.3%to their lowest close in 28 months, as risk aversion deepened in the absence of policy initiatives to revive slowing domestic growth.
The Sensex fell by 204.26 points or 1.33% to 15,175.08? a new 28-month low. The National Stock Exchange?s Nifty shut shop at 4,544.20, down 68.9 points or 1.49% from the previous close. Indian shares Investor confidence was further dented when European shares initially extended a two-week slide after a euro zone plan to boost crisis funds parked with the IMF failed to reach a hoped-for target.
Engineering and construction conglomerate Larsen and Toubro , which has been facing a slowdown in new orders as companies put off investment in large projects, was among the big losers.
The whole India story was built around just one word — growth, said Jagannadham Thunuguntla, research head at SMC Global Securities. Now that growth is not there and nobody is interested in this market.
The main 30-share BSE index shed 1.33%, or 204.26 points, to 15,175.08, its lowest close since August, 2009. All but 5 of its components ended in the red.
Industrial output in India fell for the first time in two years in October, shrinking 5.1%, and the central bank held interest rates unchanged last week after 13 rounds of increases since early 2010.
Pushed to a corner by a series of corruption scandals, the ruling coalition has been unable to reach a consensus on policy decisions that are needed to lift investment and growth. Foreign funds have pulled out a net $300 million from Indian shares this year till last Friday, after ploughing in a record of more than $29 billion in 2010.
It is tough to find many optimists willing to bet their money on Indian equities at the moment, brokerage IIFL said in a research note on Tuesday.
Swelling fiscal deficit, widening current account gap, high interest rates, slowing economy and policy inaction were driving investors away, it said.