The benchmark BSE Sensex plummeted by 562.88 points on Friday to hit nearly 14-month low of 25,201.90 amid heavy selling in global equities ahead of the US jobs report.

    Friday's closing was the lowest level since July 14, 2014 when the index had closed at 25,006.98.

    Experts say a strong non-farm payrolls data is expected to allow Federal Reserve to consider a September rate hike.

    "The global risk is getting highlighted with the focus mounting on the prospects of a US rate hike soon," said Vinod Nair,  head - fundamental research at Geojit BNP Paribas Financial.

    Fresh weakness in the rupee against dollar also weighed.

    On a weekly basis, the Sensex lost 1,190.48 points or 4.51% and Nifty fell 346.90 points or 4.33%. This is the fourth straight weekly plunge for both the indices.

    On the day, the NSE Nifty also cracked the 7,700-level.

    Gaurav Jain, director of Hem Securities, blamed continued selling pressure by the foreign investors, weakness in rupee and global jitters for the sell-off.

    The 30-share index stayed in the negative zone for most part of the day and touched a low of 25,119.06 before ending at 25,201.90, a steep fall of 562.88 points or 2.18%.

    The gauge had gained 311.22 points in Thursday's trade.

    The broader NSE Nifty also succumbed to all-round selling and slipped below the crucial 7,700-mark to settle the session 167.95 points or 2.15% down at 7,655.05.

    In broader markets, small-cap and mid-cap indices closed lower by 2.47% and 1.90%, respectively.

    Vedanta was the top Sensex loser, tumbling 4.84%, followed by GAIL 4.73%.

    Out of 30-share Sensex pack, 28 fell, while only Bharti Airtel and Coal India managed to buck the trend.

    Sectorally, BSE realty index suffered the most by plunging 3.32%, followed by infra 3.24%, power 3.03%, bankex 2.65%, healthcare 2.42% and IT 2.34%.

    Among other Asian markets, Japan's Nikkei fell 2.15% and Hong Kong's Hang Seng shed 0.45%, while Chinese financial markets remained closed on Friday.

    European markets were also in deep red on anticipations of a strong US jobs data.

Welcome signs of a revival

The UPA's gush of reforms since September may have come a bit late to arrest the economic slide this year. So while the list of budget announcements in various stages of implementation shows a considerable effort by the government to put the economy back on the rails, growth in 2012-13, admits the finance ministry's mid-year review, will remain below 6%. This of course comes with the customary warnings that both fiscal and monetary policy need to be supportive to sustain investor confidence and the government must chip away at the supply kinks that keep prices aloft in India. The good news is that the economy has bottomed out, with industry showing signs of revival, the winter crop making up some of the losses of the delayed monsoon and services riding on this turnaround. The joker in the pack is inflation which, as the central bank doesn't tire of pointing out, may surprise with its persistence.

In the format that the finance ministry presents its mid-year review, there is extra emphasis on announcements made in the budget and their fate. In this the 2012-13 review offers a peek into the government's reformist resolve. Among the announcements implemented is evolving consensus over foreign investment in supermarkets, a harmonised master list for infrastructure industries, seed funding for the Delhi-Mumbai Industrial Corridor, capital for rural banks, allowing international airlines to buy into local ones, foreign loans for power projects, and bills on micro-finance and small industries. In the works are a switch to cash transfers for subsidies, overhaul of direct and indirect taxes, pruning of centrally sponsored schemes, and five missions to raise farm yields. This is commendable progress on budget proposals made by Pranab Mukherjee and implemented by P Chidambaram, who has also drawn his own reforms roadmap for the rest of the UPA's term.

The back-loading comes with a price, though. The fiscal deficit is now expected to reach 5.3%, higher than the budget target. Mr Chidamabaram is taking this as the start of the journey to a 3% fiscal deficit in five years. He will have to ensure the milestones for the first two are met despite looming elections. Also ambitious tax reforms predicated on an economy growing at 8% will have to be reviewed against the current revenue performance. Critically, the road ahead for Mr Chidambaram is smart spending, given that he is unlikely to be able to convince the Congress to whittle down welfare in an election year. For instance, a study commissioned by the finance ministry suggests a one-shot 30% increase in diesel prices could lower average inflation in 2011-15 from 7.13% to 5.68%.

 

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