Stocks skid on rising oil price worries
The steep increase in trade deficit and talks of a crack within the ruling coalition over oil price hike pulled share prices down today, reports MC Vaijayanthi.Updated: Jun 02, 2008 20:41 IST
The steep increase in trade deficit and talks of a crack within the ruling coalition over oil price hike pulled share prices down today. As trade deficit jumped to $9.87 billion (Rs 41,690 crore) in April, the news sent a wave of panic selling in stock markets. The BSE Sensex dropped below the 16,000 mark in the late hour of trade and closed at 16,063, down 352 points or 2.2 per cent.
The Sensex managed to close above the 16,000 mark only because of the average index level in the last half an hour is taken as the closing level of the index. The NSE Nifty too fell by 2.7 per cent to 4,739 points. Markets read the trade data to indicate further weakening of the fiscal situation and fears that it could trigger sell-off by foreign investors.
"If government finances worsen, we fear there could be a downgrade of country’s credit rating which might result in FII redemptions," said Anita Gandhi, head (institutional business), Arihant Capital Markets. Sensex was trading in the positive territory till noon and sentiment changed for the worse once the trade data was released. Realty, PSU and metal indices bore the brunt, falling 4 per cent, 3.8 per cent and 3.7 per cent respectively.
Even technology stocks, viewed as defensive stocks insulated from inflation and oil price worries, were not spared. As rupee stabilised as a result of Reserve Bank of India’s move to ease external commercial borrowing and borrowings by oil importers, infotech stocks too corrected.
Lack of consensus over oil price hike has also left the market worried. A section of market participants say, rumours about communist allies withdrawing support to the government was the main reason for market fall.