Strong global cues failed to arrest weak domestic sentiments and both the Sensex and Nifty fell sharply by 2.4% on Friday after Prime Minister Manmohan Singh said that rising inflation posed a serious threat to India’s growth plans.
The National Stock Exchange’s Nifty closed at a six-month low of 5,395.7, while the benchmark Sensex of the Bombay Stock Exchange fell by 441 points to close at a five-month low of 18,008.0 before hitting an intra-day low of 17,926.9.The Indian markets fell sharply in the second half, reacting to Singh’s comments. The Prime Minister also said that farm supply chains needed to be boosted with organised retail chains.
Led by concerns surrounding rising inflation, interest rates and surging commodity prices, the Sensex has fallen by 14.3% in the last three months.
“There is no liquidity-driven market movement as FIIs are not participating in the markets and will remain out till the time issues around inflation, interest rate and governance subside,” said CJ George, managing director at Geojit BNP Paribas Financial Services.
The real estate sector has been leading the fall with the BSE realty index down 41% since November 5, 2010, when the Sensex closed at 21,004. Capital goods and banking indices have fallen 21.6% and 21.4% respectively.
While the BSE small-cap and mid-cap indices have lost 22.4% and 24.6%, respectively, since November 5, 2010, Friday saw a significant fall in large-cap stocks as the Sensex fall was steeper than the mid-cap and the small-cap indices — a general trend in any fall when investors first exit the mid-caps and small-caps.
M&M (5.3%) and ITC (4.2%) led the fall among Sensex companies. RIL and TCS also fell by 2.5% and 3.1% respectively during the day.