Sensex down 372 points; gold, commodities see sharp fall.
Equity markets across the world lost ground today on concerns that global recovery could still be a distant dream. China registered a slowdown in manufacturing growth, fuelling fears of a fresh crisis at a time when Europe does not seem totally out of the woods. Commodity prices fell further while the euro extended its longest monthly decline versus the dollar in 10 years.
The 30-share Sensex of the Bombay Stock Exchange (BSE) snapped its four-day winning streak, falling 372.60 points, or 2.20 per cent, to close at 16,572.03. The broader S&P CNX Nifty of the National Stock Exchange (NSE) settled the day at 4,970.20, down 116.10 points, or 2.28 per cent.
Domestic factors, including gold touching a new all-time high, and a freak trade in Reliance Industries, which has the highest weight in benchmark indices, abetted the fall. Market players are also worried over the central bank’s announcement of a fresh Rs 13,000 crore bond auction.
According to Ridham Desai, managing director and head of Indian equity research, Morgan Stanley, the markets are seeing a lot of selling from “overseas investors either because of hedging of positions or redemptions from clients”.
“It’s a good thing that has happened as it has cooled the market,” said Desai.
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Reliance Industries and financials, which gained in the past few sessions, saw widespread selling, while leading car maker Maruti Suzuki bucked the trend after it said May car sales were its highest-ever in a month.
“We are hovering in a trading range. Whenever we are close to the upper range, there has been profit-booking because investors are expecting the markets to remain weak,” said D D Sharma, senior vice-president at Anand Rathi Securities.
“Weak European markets are adding to the pressure.”
A survey showed India's manufacturing sector expanded at its fastest rate in more than two years in May, bolstered by steady growth in output, new orders and employment.
Official data on Monday showed the economy grew 8.6 per cent in the March quarter, its fastest in six months, thanks to government and consumer spending.
Growth is expected to be 8.5 per cent in the year that started on April 1, Finance Minister Pranab Mukherjee said after the data were released.
Analysts said the forecast was probably optimistic but some worried it might hasten the government rolling back stimulus measures and raising of interest rates.
“High inflation, sluggish private consumption and a softening stimulus are some of the key concerns. Interest rates will also head north, though at a gradual pace,” brokerage India Infoline said in a note.
Financial stocks buckled under pressure, with largest lender State Bank of India down 2.6 per cent to Rs 2,210.15, private sector lender ICICI Bank falling 3.3 per cent to Rs 838.35, and mortgage lender Housing Development Finance Corp losing 2.9 per cent.
Metal stocks Hindalco and Sterlite Industries fell as London copper futures slipped after a bank holiday, and were weighed down by warnings from the European central bank and China about economic recovery.
Markets fall on global..
Auto makers were less affected as India continued to be one of the few bright spots globally for auto sales, helped by improving consumer spending, though rising costs remain a concern for the companies. Maruti Suzuki rose 1.8 per cent to Rs 1,259.20, but Hero Honda fell 1 per cent to Rs 1,917.90, after reporting May sales rose 14 per cent, while Mahindra & Mahindra lost 1.5 per cent to Rs 563.90.
In the broader market, declines led advances in the ratio of 1.8:1 on moderate volume of 351 million shares.
Gold
Gold futures on the Multi Commodity Exchange (MCX) traded higher on Tuesday, after hitting a new record high of Rs 18,762 per 10 grams. The gains in the yellow metal in India were in line with the global strengthening of gold prices.
Commodities
Crude oil futures declined nearly $2 a barrel on worries about Europe’s debt troubles that is leading to investors flocking to the US dollar. According to reports, a stronger dollar is undermining demand for oil as a hedge against inflation. The contract for July delivery fell $1.84, or 2.5 per cent, to $72.13 a barrel on the New York Mercantile Exchange.
Industrial metals also fell on Tuesday, with copper dropping to its lowest in a week. Nickel also lost ground while zinc and lead tumbled around 4 per cent. Copper for three months delivery on the London Metal Exchange fell to $6,700 a tonne, after falling as low as $6,678 a tonne, its lowest since May 25.