A combination of negative news flow on the domestic and global fronts saw the Indian benchmark indices lose heavy ground on Monday. With most stocks ending the day in the red, the indices fell to a two-week low, with the Nifty falling below the psychological level of 5,000.
Fears of a default in the euro zone got louder, with many European indices falling to more than two-year lows. The Asian markets were not spared either, with some leading indices losing nearly five per cent in a single day's trade. The pessimism in the Indian market was compounded by the fact that industrial output grew at its slowest pace in 21 months.
The 30-share BSE Sensex lost 2.17 per cent, or, 365 points to close the day at 16,501.74 — its lowest close since August 24. Nearly 2,000 stocks on BSE ended in negative territory, as against a mere 875 gainers. The broader 50-share Nifty of the National Stock Exchange settled at 4,946.80, down 112.65 points, or, 2.23 per cent.
“The situation in Europe continues to remain precarious,” says Sanjeev Zarbade, VP (private client group) research, Kotak Securities. “There has been growing opposition within Germany over the bailing out of highly indebted countries (Greece). At 3.3 per cent, the IIP data for July is also below expectations. The disappointing data further added to the selling pressure,” he added.
Output at factories, utilities and mines rose 3.3 per cent from a year earlier, following an 8.8 per cent gain in June, the Central Statistical Office said. This is the slowest pace of growth for India's industrial production in 2 years, as consumer demand moderated after record rate rises. The rupee fell to its lowest level in more than a year.
Meanwhile, reports suggest a German policymaker's resignation from the European Central Bank's board has exposed the internal discord over its bond-buying programme — one of its main weapons in fighting the debt crisis by forcing down yields on debt of countries under pressure from the bond markets. This led to a huge sell-off in the US markets on Friday.
Back in India, Tata Motors’ group chief executive officer resigned on Friday, 18 months after joining. The stock fell 4.3 per cent to close at Rs 146.35, after falling 6.2 per cent intra-day.
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While ICICI Bank fell 3.8 per cent to Rs 862.35, its lowest close in two weeks, State Bank of India lost 4.6 per cent to close at Rs 1,863.40. The Reserve Bank of India is widely expected to increase rates on Friday, which would be the 12th increase in an 18-month tightening cycle.
Infosys fell 3.3 per cent to Rs 2,198.45. Tata Consultancy Services fell three per cent to Rs 985.70.