A continuous slide in the Chinese markets, increased chances of US rate hike, sinking rupee and uncertainty over the recommendations on retrospective tax subdued investor sentiments in the Indian equity markets on Thursday.
Bearish sentiments were seen to rule on the S&P Bombay Stock Exchange (BSE) with its barometer 30-scrip sensitive index (Sensex) closing 324 points or 1.16 percent down.
Similar negative sentiments were witnessed at the wider 50-scrip Nifty of the National Stock Exchange (NSE) which closed 122.40 points or 1.44 percent in the red at 8,372.75 points.
The S&P BSE Sensex, which opened at 27,959.19 points, closed at 27,607.82 points -- down 323.82 points or 1.16 percent from the previous day's close at 27,931.64 points.
The Sensex touched a high of 27,964.60 points and a low of 27,564.16 points in the intra-day trade.
Analysts pointed out that weak global cues coupled with uncertainty over the government's retro-tax committee's report dampened the Indian markets. The negative bias washed out healthy macros like announcements about new banks licences and global slide in commodity prices, especially crude oil.
The most significant downside for the day emanated from US and Chinese markets.
"The US and Chinese markets have been under strain. Today, the Chinese markets continued their downward movement despite various measures taken by the government there. This shows that the problem is deep rooted and the impact might be much greater. This fact unnerved Indian investors," Anand James, co-head, technical research, Geojit BNP Paribas, told IANS.
Concerns about the Chinese markets have grown after various efforts by the government, brokerage firms and mutual funds there have failed to arrest the fall.
Some estimates point out that the continuous slide in the exchanges of the $10-trillion strong economy has wiped off 40-45 percent of the entire stock value in the last three months.
Investors were also cautious about the growing possibility of US raising its interest rate after a decade of easy financing. The intent was made clear by the minutes of the last Federal Open Market Committee (FOMC) meet which was held on July 28-29.
"Sharp sell-off was witnessed across the globe after the release of FOMC minutes last night which suggested that the US Fed can hike rates in September," Gaurav Jain, director with Hem Securities said.
Higher interest rates in the US are expected to lead the FPIs (Foreign Portfolio Investors) away from emerging markets such as India.
The markets were also anxious to known the government's position on the recommendations made by the Justice A.P. Shah committee on minimum alternate tax (MAT).
The MAT issue on capital gains tax is expected to impact the margins of foreign funds. This might impact the inflows from the FPIs into Indian stock markets.
At the same time, the rupee touched a new two-year low in the intra-day trade at Rs.65.69 to a dollar -- the lowest since September, 2013. It later closed at Rs.65.56.
Sector-wise, all 12 indices of the BSE except for fast moving consumer goods (FMCG) and healthcare stocks closed in the red.
The S&P BSE FMCG index rose by 106.10 points and healthcare index gained by 68.94 points.
On the other hand, the S&P BSE banks index plunged by 499.82 points, automobile index receded by 353.22 points, capital goods index declined by 328.92 points, information technology (IT) index lost 269.65 points and consumer durables index dropped by 214.12 point.
Major Sensex gainers in Thursday's trade were: Lupin, up 5.39 percent at Rs.1,892.10; ITC, up 3.90 percent at Rs.329; Dr.Reddy's Lab, up 1.54 percent at Rs.4,297; and Sun Pharma, up 0.91 percent at Rs.935.65.
The major Sensex losers were: Vedanta, down 4 percent at Rs.98.50; Axis Bank, down 3.68 percent at Rs.534.20; Reliance Industries, down 3.55 percent at Rs.918.85; BHEL, down 3.30 percent at Rs.253.35; and Tata Steel, down 3.30 percent at Rs.241.65.
Among the Asian markets, Japan's Nikkei fell by 0.91 percent, Hong Kong's Hang Seng dropped by 1.77 percent and China's Shanghai Composite Index lost 3.39 percent
In Europe, London's FTSE 100 index tumbled by 0.36 percent, French CAC 40 tripped by 1.24 percent and Germany's DAX Index dropped by 1.06 percent at the closing bell here.
