MUMBAI: A host of negative factors hit
the markets on the first day of the July series of derivatives contracts,
causing the sensex to plummet by 620 points and close under the psychologically
important 14K mark. The benchmark index ended the day at 13,802 down by 4.3%
with not a single constituent of the 30-share barometer able to notch up any
gains. But it wasn't just the sensex that closed in the red.
Every
other major global index slid as crude hit a new record peak of over $141 per
barrel. Wall Street had closed sharply lower overnight and Asian markets
followed suit at Friday's opening.
And that wasn't the only piece of
bad news. Inflation hit 11.42% for the week ended June 14. This was in line with
market expectations but with absolutely no positive newsflow the numbers further
dampened the trading sentiment. Fears of a further monetary tightening by the
Reserve Bank of India (RBI) weighed on the sentiment. Political uncertainty
arising from the Indo-US nuclear deal was yet another factor that pulled down
the bourses.
Market players feel that investors firmly believe that
near-term issues affecting the economy and the corporate sector are yet to get
over soon and hence the sensex close at below 14K. It was the lowest close of
the sensex in over 10 months." High oil prices will impact the already slowing
global economy. Domestic concerns like higher inflation, more monetary action
from RBI and political instability also add to the weakness," said Amitabh
Chakraborty, president-equity, Religare Securities.
To add to
worries, US markets opened weak and a sharp slide might impact domestic bourses
on Monday.
During the day, the broader markets also closed in the red
although the sensex was hit the hardest. The BSE mid-cap index dropped by 3.2%
and the small-cap index was down 2.7%. Among the sectoral indices there was
sustained selling across-the-board and not a single sectoral index closed with
gains. The banking and auto indices were hit the hardest on expectations of
further tightening of monetary policy. The banking and the auto indices both
closed 5.3% lower, while metals, realty and power each closed over 4%
down.
Laggards were led by Tata Motors and HDFC, each closing over 8%
lower. Wipro, Rel Infra, Ambuja Cement, Jaiprakash M&M also closed over 7%
lower.