Markets drop on political worries

Markets slipped in trades as political uncertainty continued to dampen investor sentiments. Bourses ignored positive cues from global peers as most of the sectoral indices dropped. The Sensex, after a soft opening, kept falling as the day progressed with energy, auto and realty losing more than other sectors. The BSE benchmark index touched a low of 17,850 and finally ended with a loss of 1.5% (271 points) at 17,879. The NSE Nifty shed 1.3% (73 points) to end at 5,374.

The political troubles of the ruling UPA government seems to be far from over as the Opposition demanded the resignation of Prime Minister Manmohan Singh following a Wikileaks cable showing that bribes had been given for votes during the Indo-US nuclear treaty. The Congress, which is already burdened by corruption charges, however, denied all such allegations.

Meanwhile, global indices were in the positive zone. The Nikkei gained 2.7% at 9,206. Taiwan Weighted and Seoul Composite added over 1% each in trades.

The BSE mid and small-cap indices outperformed the benchmark and were down 0.4% and 0.7%, respectively. All the sectoral indices were in red. The BSE metal index erased early gains and slipped in the red towards the close. Index heavyweight Tata Steel gained 0.3% at Rs 596 following a buzz of a price hike. Nalco gained 3.3% to Rs 108 while NMDC jumped 3% to Rs 280. Welspun Corp and JSW Steel were up marginally in trades.

However, the BSE Oil & Gas index shed 2.6% mainly on account of a significant fall in Reliance. IT stocks fell on fears that the Japanese earthquake may have a fallout on international deals and hit plans of inorganic growth for the sector. Tech Mahindra, Financial Technologies, Oracle Financial Services and HCL Tech were down 1-4% each. Heavyweights, TCS, Infosys and Wipro shed over 1% today.

Realty and banking stocks were down - a day after the RBI hiked repo and reverse repo rates by 25 basis points each.

"The policy rates are already higher than neutral rates, further tightening will hurt investment growth. Hence, any increase in rates may come at the expense of growth. Nonetheless, given the inflationary pressures, RBI is likely to persist with its current anti-inflationary stance. We expect further rate hikes of 50bps in the current calendar year,” said Edelweiss Research.

Reliance was the biggest drag on the Sensex, slipping on reports that the gas output at the KG gas basin may decline in FY13. The stock shed 3.7% to Rs 993. Reliance Infrastructure dropped 3.8% to Rs 627. Reliance Communications was down 2% at Rs 105.

Mahindra & Mahindra dropped 3.3% to Rs 633. Other auto stocks were also in red. Hero Honda slipped 2.3% to Rs 1,474. Tata Motors dipped 2% to Rs 1,118. Maruti Suzuki dipped in trades as Japanese worries continued to weigh.

HDFC, BHEL, Cipla, HDFC Bank, SBI and ONGC were among the losers.

Multiplex stocks slipped on news that they would cut down prices in absence of any big releases. Inox Leisure tumbled 3.2% to Rs 49. PVR slumped 6% to Rs 98. Cinemax crashed 7% to Rs 46.

Crude oil prices remained high as the crisis in West Asia continued. Brent crude was trading at $116.56. PSU OMCs slipped with crude oil gaining strength. Aviation stocks also dropped on fears that ATF may mirror the rise in crude price. HPCL and BPCL shed 2% each while IOC dropped 1% in trades. Among aviation stocks, Spicejet tumbled 4% while Kingfisher and Jet Airways dropped 3% each.

The BSE market breadth weakened after showing strength in opening trades. It ended with 1,048 stocks advancing and 1,801 stocks declining out of a total of 2,969 stocks traded today.