Global cues unleash bears, Sensex plunges by over 1,000 points (Third Lead)

A massive downturn in the US and East Asian stock markets unleashed a selling frenzy in the Indian equity markets during the trade session on Tuesday.

The two main indices of the Indian equity market -- S&P BSE Sensex and NSE Nifty50 -- plunged by around 3.30 per cent each, with the Sensex plunging by over 1,000 points.

Market observers pointed-out that factors like the budgetary proposal to tax long-term gains on shares and concerns over the central government's fiscal prudence measures amplified the global downturn.

All the major Asian stock markets -- Nikkei, Hang Seng, Shaghai, Taipei, Seoul and Singapore -- edged-lower following an overnight downward correction in Dow Jones by over 1,100 points.

Just after the pre-open session, the barometer 30-scrip Sensitive Index of the BSE traded more than 1,000 points or 2.90 per cent lower from Monday's close.

Similarly, the wider Nifty50 of the National Stock Exchange receded deep into the red. It plunged by over 300 points or 3.00 per cent.

Around 12.00 p.m., the Sensex traded lower by 1,023.77 points or 2.95 per cent to 33,733.39 points from its previous close of 34,757.16 points.

The NSE Nifty50 traded lower by 311.35 points or 2.92 per cent at 10,355.20 points.

"The unprecedented downfall in Dow yesterday (Monday) and combination of other negative factors like the high fiscal deficit projected and proposal on LTCG and fear of the stand that the RBI (Reserve Bank of India) will take during Wednesday's review has led to this melt-down or selling panic," Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS.

"Not just India but globally this downturn has taken place due to the fear of high interest rates regime coming into the developed markets amid high valuations... On the domestic front other factors like high valuations, uncertainties on growth, inflation and interest rates and fears of RBI turning hawkish are unnerving investors."

Vinod Nair, Head of Research, Geojit Financial Services said that a spike in global bond yield and high valuation triggered a sell-off in the global equity market.

"Currently, we are under a tactical shift in asset classes after the overwhelming return from equity market in the last one to three years, funds are shifting out of equity asset to bonds. In India, we are seeing an extended impact in the domestic market post the LTCG and fiscal deficit turmoil.

"The government's 10-year yield stands at 7.55 per cent compared to 6.90 per cent three month back. This negative trend will stabilise as valuation sets to a normal level along with reduction in bond yield. In the short-term the upcoming RBI monetary policy will be a key trigger for the market, the outcome of which is expected to be status quo, but any commentary over government's fiscal policy and concern over rising yield can add volatility."

According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, more "volatility" was expected and can last till Thursday.

In terms of sectors, all the 19 sub-indices of the BSE plunged into the negative territory during the intra-day trade.

The S&P BSE banking index plummeted by 1,039.97 points, followed by consumer durables index by 847.81 points, automobile index by 751.27 points, the metals index by 517.01 points and the capital goods index by 429.26 points.

Major Sensex losers were: Tata Motors, down 6.45 per cent at Rs 370.50; Tata Motors DVR, down 5.35 per cent at Rs 207.10; Axis Bank, down 4.83 per cent at Rs 538.75; Yes Bank, down 3.75 per cent at Rs 331.20; and HDFC Bank, down 3.71 per cent at Rs 1,843.

--IANS

rv/ksk