Mumbai, Aug. 21: It’s that sinking feeling again. The ongoing political crisis that threatens to destabilise the government today caught up with the sensex and sent the bellwether index below the 14,000-mark.
The losses completely erased yesterday’s gains that were triggered by the euphoria in the global markets after the US Federal Reserve’s surprise decision last Friday to cut a key interest rate by 50 basis points. Brokers now fear that the market will remain unsettled until the political crisis is resolved.
“Nobody likes political uncertainty. Several political analysts have started talking about early elections. That has really unnerved the markets,” said a senior official with a foreign brokerage.
He added that participation across the investor spectrum has been low. Foreign institutional investors (FIIs), for instance, made only token purchases on Monday while they were net sellers to the extent of $1.5 billion in the two preceding trading sessions.
The sensex had opened firm at 14,512.19 and hit an intra-day high of 14,534.51. However, the tense standoff in Parliament today and the continuing UPA-Left impasse on the Indo-US nuclear deal sparked a wave of selling around noon. Reflecting the market uneasiness over the government’s future, the sensex closed at a three-month low of 13,989.11, a net fall of 438.44 points or 3.04 per cent from yesterday's close of 14,427.55.
Brokers added that the market sentiment was also dampened by a dramatic fall in Asian stocks from the day's highs and a weak beginning in the European markets on renewed fears of global credit shortage and reports that a German bank had now been sucked into the vortex of an ever-widening sub-prime mortgage crisis.
All the sectoral indices on the BSE finished in the negative territory with banks, IT, metal and realty stocks witnessing hefty losses. The BSE Bankex fell by 4.41 per cent, the IT index by 3.68 per cent, the metals index by 3.45 per cent and the realty index by 4.59 per cent.
IT stocks have been mauled because of fears that the US sub-prime mortgage crisis would prompt lower spending on software solutions while bank stocks weakened amid selling pressure across global markets.