CMP, FM warning pulls Sensex down by 223 pts

‘‘Basically, disappointment with the broad intent of the Common Minimum Programme resulted in today’s decline. Besides, most of the stocks that have fallen are active in the F&O segment, so one reason was unwinding in that sector. The market didn’t feel very enthused by the announcements made yesterday. It will keenly watch any further policy announcements made by the Finance Minister,’’ says Ashim Syal, chief investment officer, ING Vysya Mutual Fund.

During early trades the BSE Sensex opened sharply lower at 5026.92 but plunged to the intra-day low of 4821.59. It finally closed the day with a loss of 4.41 per cent over yesterday’s closing of 4,835.39.

Banking, automobile, PSU and cement pivotals all contributed to the overall fall of the market. The broader NSE S&P CNX Nifty Index fell by 77.65 points, or 4.89 per cent, to end at 1,508.75.

‘‘There are multiple reasons for today’s crash. There is the global problem of money shifting out of emerging markets on the back of an expected rise in US interest rates. Oil prices have also been causing concern. Finally, there is the belief that reforms in India will slow down,’’ says Paras Adenwala, Head, Equity Investments of Birla Sunlife Asset Management Company. ‘‘All these have combine to cause the correction. The way things are shaping up, it looks like some more correction is likely,’’ he added.

Brokers say the Congress-led United Progressive Alliance (UPA) government’s CMP was not liked by the investors. ‘‘A slowdown in the pace of reforms may affect general economic growth and add subsidies to the agriculture sector may only precipitate a crisis in the fiscal deficit situation,’’ says Pawan Dharnidharka, a BSE broker.

Till yesterday, the FIIs had already sold a net $840 million worth of shares in May 2004 so far, after pumping in $4.3 billion in the first four months of the new year. Brokers fear a worsening fiscal situation may result in further foreign fund outflows. ‘‘There was nothing for the market as well as for foreign investments in the CMP,’’ says Venkatesh Aiyar, a BSE dealer. ‘‘The FM’s warning further added to markets’ woes,’’ he added.