Markets wilt on poll jitters, dollar flight from Asia

Sensex loses 2%, Re slips 1%.

A sharp fall in global equity indices and domestic political uncertainty led the Bombay Stock Exchange (BSE) Sensex to crash 168 points in intra-day trades to a low of 5,501.17, before recovering to a six-week closing low of 5,555.84.

Thus, the Sensex today lost 2 per cent (113.74 points) from its previous close and almost 250 points since the election process kicked off on April 20.

Key Asian indices were all lower on Monday as foreign funds are feared to be pulling back from Asia and returning to the US markets, encouraged by signs of an improving domestic economy and a stronger US dollar.

Among Asian indices, the Seoul Composite of South Korea crashed by 5.73 per cent, Thailand's SET and Indonesia's Jakarta Composite fell 4.90 per cent each, while Japan's Nikkei-225 fell 4.84 per cent. The Hang Seng fell 3.57 per cent.

The sentiment pulled down the rupee 1 per cent lower to close at 45.07 today, its lowest finish since March 22. On Friday, the rupee had closed at 44.65.

Yields on government bonds jumped as the spectre of political uncertainty loomed over the market. The yield on the benchmark 10-year paper, the 7.37 per cent 2014, closed at 5.19 per cent, after touching a high of 5.21 per cent, as against a close of 5.13 per cent on Friday.

Prices of long-term securities fell by 30 paise while those of medium-term paper dropped by 15-20 paise.

Dealers said the rupee might touch 45.25 tomorrow and the yield on the 10-year paper might inch towards 5.25 per cent. Traders said the central bank sold dollars from time to time to ease tightness in supplies.

Apart from the election, the dollar's rise overseas is adding to the market's worries. Banks were seen squaring short dollar positions, while companies were covering foreign exchange exposures.

Meanwhile, foreign institutional investors (FIIs) were net sellers of Indian shares on Friday, at Rs 168 crore, and have sold shares worth Rs 250 crore this month, according to data on the Securities and Exchange Board of India's website.

The breadth of the market was negative today, with losers outpacing gainers 5:3 on the BSE. The 30-scrip Sensex basket saw 26 scrips closing lower.

Gainers in the Sensex basket included HDFC Bank, up 2.40 per cent to Rs 384.70. Bhel was up 2.38 per cent to Rs 596.45, HDFC gained 0.56 per cent to Rs 647.75 and Bajaj Auto was up 0.06 per cent to Rs 936.35.

Heavyweight ITC was down 2.74 per cent to Rs 1,002.30, Reliance Industries fell 2.47 per cent to Rs 519.15, State Bank of India was down 2.42 per cent to Rs 628.90 and the Hindustan Lever scrip fell 1.66 per cent to Rs 142.50.

The Hindalco scrip was the biggest loser in the Sensex basket, losing 6.32 per cent to Rs 1,030.50 at close. The Bharti Tele-Ventures scrip fell 5.38 per cent to Rs 158.25 and Tata Steel fell 3.93 per cent to Rs 332.25.

The L&T scrip fell 4.23 per cent to Rs 557.55, Grasim was down 3.34 per cent to Rs 1,162.20, ACC was down 3.32 per cent to Rs 274.80 and Gujarat Ambuja Cements fell 2.25 per cent to Rs 331.85.

The overseas influence hit tech stocks the worst, with the BSE TECk index falling 2.51 per cent. The IT index was down 1.97 per cent.

The Satyam Computer scrip fell 4.91 per cent to Rs 304.70, Infosys Technologies was down 1.85 per cent to Rs 5,126.40 and Wipro was down 0.82 per cent to Rs 1,535.95. Among others, the BSE FMCG index fell 1.67 per cent and the PSU index lost 1.65 per cent.

Traded volumes were lower today: with the cash market turnover at Rs 1,839.68 crore on the BSE and Rs 4,239.34 crore on the National Stock Exchange (NSE) as investors stayed away, deterred by the unclear political outlook on the last day of voting in the general elections.

Market players indicate that a clear majority is vital for the elected government to push forward market-friendly reforms such as privatisation of key PSUs.

Amitabh Chakravorthy, head of research at Kotak Securities said, "Today's crash was more of an impact of global markets trading lower. The markets have more or less discounted the election results and may witness a relief rally tomorrow but with the action limited to specific stocks."

Deven Choksey, managing director, K R Choksey shares and securities said, "The markets are still not in the bearish phase and investors should be cautiously optimistic till the political uncertainty is over."