With possibilities of a mid-term poll looming, the benchmark Sensex of the Bombay Stock Exchange fell for a third straight session on Monday as investors sold on worries that rising commodity prices and a consequent spike in inflation could reduce chances of an interest rate cut.
While the Sensex ended the day 281.97 points lower at 17,491.39 points, the 50-share Nifty of the National Stock Exchange closed at 5,085 points, down by 1.94 per cent.
Reserve Bank of India Governor YV Reddy said on Monday that India was vulnerable to international shocks as well as fluctuations in grain output and Congress President Sonia Gandhi rapped the party’s Left allies the day before for their opposition to the Indo-US nuclear deal.
"Political uncertainties and little idea on the likely interest rate regime have put investors in a dilemma. However, foreign funds are buying aggressively and we do not think the Sensex will dip below 16,000," said Manish Sonthalia, vice-president (equity strategy), Motilal Oswal.
With the US reporting a surprisingly positive jobs data, the chances of a further half a percentage point cut in the Fed rate, triggering an influx of money into emerging markets, look remote.
On Monday, the Bombay Stock Exchange announced the replacement of Dr Reddy's Laboratories in the Sensex by real estate giant DLF.