Strong speculation that the Left parties could turn kingmakers again spooked the markets in late trading today.
After opening on a weak note in the morning, the market went through choppy sessions and rose to an intra-day high of 12, 256.43, but fell sharply by over 200 points at around 3 pm, when rumours of the Congress-led United Progressive Alliance leading the pre-poll surveys started circulating in dealing rooms.
What worried the markets is that the UPA would have to again depend on the Left parties for forming the next government. A weak coalition dependent on the reforms-unfriendly Left could leave investors wary, experts felt.
The next two sessions before the final poll verdict is announced was also likely to see nervous trading, they said.
Till yesterday, brokers were speculating that the market-friendly Bharatiya Janata Party (BJP) coalition could form the next government.
The Bombay Stock Exchange Sensitive Index, or Sensex, managed to recoup some of the losses in the final few minutes to end the session down 138 points down at 12,019.65 points. The Nifty closed down 46 points down at 3,635.25.
Market sources said that foreign institutional investors (FIIs), who were buyers of Rs 4,107 crore (according BSE provisional data) in equities, sold Nifty futures aggressively.
There were strong rumours that two top FIIs sold 3.5 million Nifty futures in the last hour of trading.
Although the final poll results would be declared on Saturday, experts said that both BJP and Congress were unlikely to get a clear majority. This would lead to a battle for new allies to form a new government.
“At the moment, there is no clarity and a fractured verdict is what everyone has been discounting. Investors were hoping for a victory of the BJP-led National Democratic Alliance (NDA) till yesterday, which is why the markets had posted a sharp rally. A victory for UPA may also be acceptable if it is not entirely dependent on the Left,” said sources.
Metal, IT, FMCG, PSU and Oil& Gas were the biggest sectoral losers on the BSE as selling action picked up during the final trading hours of the day on almost all counters. Tata Steel lost 3.67 per cent on its BSE listed shares and stood as the biggest loser, followed by ONGC and SBI which lost 3.44 per cent and 2.57 per cent respectively on the BSE today.
