By IANS
New Delhi : Despite a $150 billion package announced by the US last week to avert a recession and encouraging statements from Indian policymakers, equity markets in the country closed on a weak note Monday, a day ahead of the monetary policy review by the central bank.
The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened lower at 18,011.89 points, and after moving in a range of 796.92 points during the first two hours of trading, it closed with a loss of 208.88 points, or 1.14 percent.
The indices for only automobile and banking stocks bucked the trend, while that for realty dipped the most with a decline of 4.54 percent, followed by a 3.69 percent drop for the IT index.
The market breadth was also negative with just 83 scrips in the ‘A’ group ending in the positive territory with 135 registering losses, data with the exchange showed.
Within the 30-share Sensex, 18 scrips that goes into its basket declined, while the remaining 12, led by Bajaj Auto, Maruti Suzuki, Reliance Energy and Housing Development Finance Corp, ended in the positive territory.
The losers were led by DLF Ltd, down 5.57 percent, followed by Wipro, down 5.35 percent, Bharti Airtel, down 4.91 percent, Infosys Technologies, down 4.90 percent and Ranbaxy, down 4.77 percent.
“Investors were reluctant to take positions before the monetary policy review by the Reserve Bank of India (RBI) Tuesday, especially after the major carnage last week,” said an analyst with a leading brokerage house here.
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.
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, he 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 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.
The recovery was attributed to statements on strong fundamentals of the Indian economy Prime Minister Manmohan Singh and his Finance Minister P. Chidambaram made. Both said the impact on India of a possible US recession would be minimal.