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Sensex tanks on 2G political woes

Political worries over the 2G spectrum scandal and its fallouts on the UPA government shook the stock markets on Friday, adding to worries over Chinese economic growth. While global markets were mixed following Chinese efforts to cool inflation, the local sentiment added to the mood in India. HT reports.

business Updated: Nov 19, 2010 23:12 IST
HT Correspondent

Political worries over the 2G spectrum scandal and its fallouts on the UPA government shook the stock markets on Friday, adding to worries over Chinese economic growth.

While global markets were mixed following Chinese efforts to cool inflation, the local sentiment added to the mood in India.

The benchmark Sensex at the Bombay Stock Exchange emerged as the biggest loser among all major markets as it fell by 345 points or 1.7 per cent to close at a two-month low of 19,585.4 on Friday.

The broader Nifty at the National Stock Exchange fell by 108 points to close at 5,890.

Some telecom companies at the heart of the 2G scam over underpriced spectrum suffered most. Reliance Communications, Videocon and Unitech all saw sharp plunges.

"Concerns about the simmering political tension over the 2G spectrum scam coupled with persistent selling by the FIIs (foreign institutional investors) hurt the sentiment,” said Amar Ambani, head of research at brokerage India Infoline.

FIIs pulled out a net of Rs 218.8 crore from the Indian markets on Friday.

China ordered banks keep more money in reserve in a move to cool inflation. The Chinese central bank has increased the reserves ratio by 0.5 percentage point with effect from November 29.

"On the domestic front, the market took the news on 2G spectrum scam, Adarsh housing scam (in Mumbai) and controversies surrounding microfinance in a negative light. And the Chinese policy combined with a weak opening of European stock markets resulted in pressures," said Alex Mathew, head of research, Geojit BNP Paribas Financial Services.

The Sensex has lost 1,420 points or 6.8 per cent since it closed at a high of 21,005 on Diwali and analysts feel that the capital markets are expected to remain volatile over the next week.

"Our advice for retail investors would be to book some profits at these times and if they want to invest for long term then infrastructure and banking are good to invest," added Mathew.

However, there are others who feel that investors should not be too worried.

"The market has already lost enough and there does not seem to be much room for a further plunge. I don’t see any panic though investors could wait for a certain trend to emerge," said Ajay Parmar, head of research at Emkay Global Financial Services.

The stock markets are looking for direction after hitting all-time highs and bad news, typically, weighs them down. Worries in the air, nervousness in the markets