A policy paralysis at home and declining hopes in Europe spooked the stock market on Thursday, with the Bombay Stock Exchange benchmark Sensex declining 2.3% or 389 points to close at 16,488 points. Intra-day, the Sensex dropped 455.5 points before recovering slightly towards close of trade.
The fall came despite the food inflation rate falling to 6.6% for the week ended November 26, compared to 8% the week before.
Major losers were Reliance Industries, which fell 3.7%, DLF (down 4%), Hindalco (-5.0%) and Jai Prakash Associates (-5.4%.)
Bickering among European leaders on resolving the euro zone crisis dampened market expectations of any credible solution from Friday’s EU summit. But that was only half the story.
“While the euro zone crisis did have its impact, a larger reason for the fall was local governance issues,” said UR Bhat, CEO, Dalton Capital Advisors. There seemed to be a sense of drift in governance which adversely affected the stock market, he felt.