By IANS
New Delhi : Despite a $150 billion package announced by the US last week to avert a recession and encouraging statements from Indian policy-makers, equity markets in the country opened on a weak note Monday, a day ahead of the credit policy review by the central bank.
The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened lower at 18,011.89 points, down 349.77 points, over Friday’s close at 18,361.66 points, when it registered one of the steepest intra-day gains ever.
As trading progressed, the index dipped further to 17,524.29 points, with a loss of 837.37 points, and was ruling at 17,698.01 points about an hour into trading with a loss of 663.65 points, or 3.61 percent.
“Investors have been nervously awaiting Tuesday’s monetary policy review by the Reserve Bank of India (RBI) after the carnage last week,” said an analyst with a leading brokerage house here.
With the US Federal Reserve announcing an interest rate cut of 75 basis points last week, the spread between India and the US has increased, which could lead to high inflows from foreign funds.
The paradox for the central bank is if it chooses to cut interest rates, inflows from foreign funds could be moderated, but if it chooses not to, industry will get no respite from borrowing at higher rates, the analyst explained.
Last week, net investment by foreign institutional investors (FIIs) was in the negative in each of the five trading days. FIIs sold equities worth a whopping $2.451 billion, data with the market regulator showed.
In the process, the 30-share Sensex saw one of its wildest weekly fluctuations ever and dipped on three of the five trading days, but managed to close with a largely moderated decline of 652.04 points or 3.43 percent.