Sensex hits 2-month low on 2G row, China tightening

The domestic stock markets tumbled to a two-month low over rumours that Prime Minister Manmohan Singh had offered to resign over the 2G spectrum allocation scam. The decision by the People’s Bank of China to raise the amount of money lenders must keep in reserve by half a percentage point to contain inflation added to the bearish sentiment.

In a highly volatile session, the 30-share Sensex of the Bombay Stock Exchange fell 345 points, or 1.73 per cent, and closed at 19,585. At the National Stock Exchange, the 50-share S&P CNX Nifty was down 108 points, or 1.8 per cent, at 5,890.

The fall was because of heavy selling in Reliance Industries, which closed 3.46 per cent down at Rs 996.8. While Reliance Infrastructure was down 5.25 per cent at Rs 945, Reliance Communications fell 3.57 per cent to Rs 148.

Frontline banking stocks were the worst hit, with the country’s largest lender, SBI, shedding 2.37 per cent at Rs 2,291. Private sector lenders ICICI Bank and HDFC Bank slipped 1.37 per cent and 1.92 per cent, respectively.

“The rate hike by China was imminent and has weighed heavy on Asia. Domestically, fluid political situation in the wake of the 2G spectrum controversy has dampened investor sentiment. The markets may stabilise once the anticipated cabinet re-shuffle at the Centre is done,” said Kishor Ostwal, managing director of CNI Research.

There were rumours the prime minister would resign on moral grounds after the apex court questioned his silence in the 2G scam. Solicitor General Gopal Subramanium, representing Singh, will appear before the court tomorrow.

Meanwhile, edgy investors booked profits after the government ordered a probe into irregularities in the award of 2G spectrum licences. Telecom Minister Andimuthu Raja resigned last week over accusations he sold telecom licences cheaply and caused a loss of up to $31 billion to the state.

The Shanghai Composite index was up 0.81 per cent. Hang Seng Index was down 0.13 per cent. Other Asian benchmark indices in Indonesia, Japan, South Korea and Taiwan were up 0.27 to 1.28 per cent.

Equity benchmarks in France, Germany and the UK fell by 0.21 to 0.92 per cent. Early trading in US index futures indicated the Dow could fall 34 points at the opening bell on Friday. Back home, while most telecom stocks fell, Bharti Airtel rose 1.22 per cent, a day after unveiling a new identity and crossing the 200-million customer-mark.