Italian elections rattle stock markets

Global stocks were roiled on Tuesday by fresh concerns over the Euro zone. India's indices fell to a three-month low, tracing weakness in European markets, which tumbled after the outcome of Italy's elections, in which anti-euro parties won half the seats.

Investors were concerned the election results in Europe's fourth largest economy could hinder economic reforms in the zone and drive up borrowing costs. The MSCI Asia Apex 50 fell 1.2 per cent, while Euro Stoxx 50 was down 2.7 per cent, with Italy's main index falling as much as five per cent when the European markets opened. The Bombay Stock Exchange's Sensex fell 316.55 points or 1.6 per cent to close at 19,015.14, the lowest since November 2012. The National Stock Exchange's Nifty declined 93.40 points or 1.6 per cent to end at 5,761.35.

But for expectations of pro-business policy announcements in the Union Budget, the decline in Indian stocks would have been sharper, said analysts. "If the Budget turns out to be a disappointment and global markets remain weak, Indian markets could see a sharp correction," said Rajesh Cheruvu, chief investment officer, India, RBS Private Banking. "In the last few days, we have managed to fall less because investors are waiting ahead of the Budget."

Hopes are high on the government announcing more measures to revive investments. Brokers said the absence of foreign institutional buying, coupled with selling by their domestic counterparts, contributed to the weakness today. Foreign institutional investors (FIIs) net-bought shares worth Rs 75 crore, while domestic institutions net-sold Rs 160 crore. The FII buying pales in comparison to the quantity of daily FII inflows into Indian equities since January last year.

FIIs poured Rs 45,572 crore or $8.46 billion into Indian stocks in 2012.

The fall in the broader market was steeper than the benchmark indices, with the mid-cap index declining 1.7 per cent and the small-cap index dropping 2.4 per cent. Losers beat gainers in the ratio of 2,072:774 on the BSE.