New proposals for financial regulations, parliament's logjam and an impending rate hike by the US gave jitters to the Indian equity markets on Friday.
A day after it fell by 134 points, the barometer of the Indian equity markets, the 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE) plunged by 258 points.
The wider 50-scrip Nifty of the National Stock Exchange (NSE) also closed in the red. It fell by 68.25 points or 0.79 percent at 8,521.55 points.
The Sensex of the S&P Bombay Stock Exchange (BSE), which opened at 28,390.50 points, closed at 28,112.31 points, down 258.53 points or 0.91 percent from the previous day's close at 28,370.84 points.
The Sensex touched a high of 28,402.64 points and a low of 28,083.76 points in the intra-day trade.
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Analysts tracking the day's trade said that after a flat opening, markets slowly and steadily declined on the back of parliament's logjam, fears of an early US rate hike and a controversial new financial code proposed by the government.
On Thursday, the government mooted a draft financial code which proposes to clip the Reserve Bank of India's autonomy, thereby undermining its ability to rein-in inflation.
This move impacted the banking sector stocks.
Investor aniety was further fuelled by a key economic data which revealed a strengthening job market in the US. In the week ending July 18, the advance figure of seasonally adjusted initial claims for jobless benefits fell by 26,000 to 255,000, the lowest level since November 1973.
Last month, the US economy added 223,000 jobs and the unemployment rate fell to a seven-year low of 5.3 percent.
Earlier, another set of data showed a rise in US home sales, which grew by 3.2 percent in June to 5.49 million.
These data points which show a recovery in the US economy just before the FOMC (Federal Open Market Committee) meet on July 29 are giving jitters to the markets.
The FOMC meet will give further clues as to when the rate hike might take place there.
With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) are expected to be led away from emerging markets such as India.
The FOMC meet is followed by the future and options (F&O) expiry in the Indian equity markets on July 30. The Indian monetary policy review by the Reserve Bank of India (RBI) is scheduled for August 4. All these upcoming events are making the markets volatile.
The markets also expect a rate cut by the RBI during its monetary policy review as it may be the last time in this calendar year to cut lending rates before inflation spirals up again and the US Fed decides on its own rates in September.
"While earnings numbers kept stocks volatile, buyers were found less keen to make decisive moves, ahead of key interest rate decisions," Anand James, co-head, technical research, Geojit BNP Paribas, told IANS.
Sector-wise, capital goods, banks, automobile, metal and oil and gas stocks came under intense selling pressure. However, fast moving consumer goods (FMCG) and consumer durables scrip saw some light buying.
The BSE S&P capital goods index plunged by 289.07 points, the bank index receded by 259.21 points, automobile index declined by 216.58 points, metal index tanked by 113.21 points and oil and gas index was lower by 87.59 points.
The S&P BSE FMCG index was higher by 9.81 points and the consumer durables index was up 6.85 points.
Major Sensex gainers during Friday's trade were: Sun Pharma, up 0.99 percent at Rs.835.75; Hero MotoCorp, up 0.88 percent at Rs.2,738.20; Cipla, up 0.68 percent at Rs.678.30; Tata Consultancy Services (TCS), up 0.64 percent at Rs.2,503.75; and Hindalco Inds, up 0.46 percent at Rs.109.05.
The major Sensex losers were: ICICI Bank, down 3.96 percent at Rs.300.50; Wipro, down 3.73 percent at Rs.566.45, Lupin, down 3.27 percent at Rs.1,672, Tata Motors, down 2.54 percent at Rs.391.15; and Gail, down 2.34 percent at Rs.361.05.
Among the Asian markets, Japan's Nikkei was up by 0.44 percent, China's Shanghai Composite Index rose by 2.44 percent, and Hong Kong's Hang Seng gained by 0.46 percent.
In Europe, the London FTSE 100 index inched up by 0.02 percent, while the French CAC 40 also gained by 0.02 percent. Germany's DAX Index fell by 0.10 percent at the closing bell.
