Mumbai, Aug. 25: The Supreme Court’s ruling on coal block allocations sparked a spontaneous sale on the stock markets and dragged down key indices from record levels as investors panicked over the implications of the ruling across various sectors.
The BSE Sensex managed to end the day in the green at a new high of 26630.74, but it fell more than 229 points from its intra-day peak.
However, the 50-share Nifty of the National Stock Exchange (NSE) was not so lucky as it came off a historic high of 7968.25 on late selling to end at 7906.30 — a fall of 6.90 points. Market circles said metal and power stocks led the selling spree as investors feared they would be worst affected by the ruling.
“It (the ruling) could have an adverse impact on projects of various companies. Though the Supreme Court has not de-allocated these blocks, in such an event these companies will have to look at fresh sources which could be time consuming and costlier,” an analyst said.
Hindalco Industries, the Aditya Birla group’s non-ferrous major, and JSPL were the worst affected by the development. While the Hindalco scrip tanked nearly 10 per cent to close at Rs 164.65, the JSPL share collapsed around 14 per cent to end at Rs 253.15.
Analysts tracking these companies said the ruling could affect at least four blocks of each of the companies.
Steel companies were sucked into the selling pressure, too. JSW Steel and Tata Steel ended the day with losses of 4.01 per cent and 4.79 per cent, respectively.
Power stocks also met with the same fate with Reliance Power ending lower by 4 per cent and Tata Power witnessing losses of 3.42 per cent. Elsewhere, Sesa Sterlite, Hindustan Zinc and SAIL finished in the red.
Market circles said the development came at a time indices looked set for another historic course. Trading began on a positive note with the Sensex hitting an intra-day high of 26630.74.
However, it came under pressure in the second half after news of the ruling spread. It finally settled with a gain of over 17 points.
“Many of us were anticipating the Nifty to hit 8000 this week. This may not happen immediately as all the attention will now be towards what the Supreme Court has to say in the next hearing on September 1,’’ an analyst with a foreign brokerage said.
A broker added that the indices would have seen more losses had it not been for defensives such as ITC, Hindustan Unilever and TCS.
Caution is also expected to prevail ahead of the expiry of derivatives on Thursday and gross domestic product data on Friday. India may also post current account deficit data sometime this week.
But analysts do not expect any big retreat in shares as foreign investors remain bullish on Indian shares. Overseas funds bought shares worth $50 million on Friday, bringing their totals for the year to $12.8 billion.
“Overall the market is stable. Coal block allocation news has created some uncertainty but continued foreign flows would negate its impact,” said Deven Choksey of K R Choksey Securities.