Shrugging off a 0.25% point cut in interest rate by the Reserve Bank of India (RBI), the benchmark Sensex on Tuesday plunged 285 points, or 1.5%, to close at 19,008 on across-the-board selling sparked by DMK’s withdrawal of support to the ruling UPA government.
CBI summons issued to Bharti Airtel chairman Sunil Bharti Mittal in additional spectrum allocation case, which brought down Bharti Airtel's shares by 4.7%, also hit sentiments.
The National Stock Exchange's benchmark Nifty fell 89 points, or 1.5%, to 5,746.
Experts said markets reacted cautiously to RBI’s rate cut as sentiments were hit by its statement that scope for future rate cuts is limited. Meanwhile a crisis in Europe over a controversial deposit tax in Cyprus also sent the market into jitters.
The Sensex plummeted 300 points intra-day to trade below 19,000 and staged a recovery after finance minister P Chidambaram’s remark that the government enjoyed majority and it was “absolutely stable”.
Among the stocks, Mahindra & Mahindra fell 3.45% after it declared closure of Jaipur and Rudrapur tractor plants for a few days to clear stocks amid falling sales.
Hit by allegations of money laundering by investigative website Cobrapost, HDFC Bank and ICICI Bank also continued to slide.
Among the indices, realty and capital goods were the worst hit, falling 3.6% and 2.7% respectively.
“It is difficult to say where exactly the market is heading,” said Deven Choksey, CEO, KR Choksey Securities. “Further course will be determined by how foreign institutional investors (FIIs) react to the situation.”
“The Cyprus episode — imposition of tax on deposits — has brought gloom around global markets and threatens to brew a fresh crisis,” said K Subramanyam, assistant vice-president of broking firm Asit C Mehta.