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Journalism of Courage
April 15: The deepening political crisis took a heavy toll on the financial markets across the country on Thursday. Share prices reeled under sustained and heavy selling pressure, sending the Bombay Stock Exchange Sensitive index (Sensex) crashing by 3.10 per cent, or 107 points, as the political crisis at the Centre led to nervous selling on the stock markets. On the other hand, the rupee plunged by nearly five paise to 42.81 against the dollar at the inter-bank foreign exchange market.
The political chaos after the AIADMK withdrew support to the BJP-led government prompted marketmen to unload shares on a broad front. As a result of the 107 point fall in Sensex, shareholders wealth (or market capitalisation – the total value of all listed shares) plunged by another Rs 13,000 crore to Rs 4,60,000 crore. With this fall, Sensex has slumped by 229 points in the last six trading sessions.
Share prices fell steeply on other exchanges also. In Delhi, the index fell by 20.44 points, or 3 per cent, to close the session at 740.97 points. Calcutta index plunged to close at 1832.67 points. On the National Stock Exchange, the S&P CNX Nifty Index fell by 25.65 points to 968.60 points in the selling avalanche.
On the BSE, Sensex opened sharply down at 3363.91 and later fluctuated in a range of 3403.29 and 3342.65 before closing at 3357.12 as against last Tuesday’s close of 3464.52, registering a fall of 107.40 points. The BSE-100 also dropped by 49.49 points to 1458.87 from previous close of 1508.36. “The market is worried about the political uncertainty if the BJP government falls. The passage of the Finance Bill is also a big question. The market will be on tenterhooks till the voting on the no-confidence motion is taken up,” said a senior broker.
Marketmen fear that the passage of Finance Bill would be hampered and the political uncertainty would lead to slow down in economic growth and recovery. Foreign institutional investors (FIIs) pressed heavy sales in high priced software and pharma scrips. However, Indian financial institutions and mutual funds picked up small lots of shares like SBI, Corporation Bank, L&T, MTNL, Tata Tea and Telco, but they could not prevent the crash in values.
“The situation in the market is uncertain… we expect an early end to the political uncertainty for the sake of economic growth,” said a fund manager. "There is no dearth of contentious issues. Several factors like the fate of the budget, FII investments in India, FDI inflows and the currency seems to be the cause of worry," said an analyst.
Several software scrips in B1 and B2 groups hit the lower price band. Other pivotals like Satyam Computer, Rhone Poulenc, BPL, Smithkline Pharma, Wartsila, Siemens, E Merck, Sun Pharma, Dig Equipment and Guj Gas hit the lower circuit filter after exhausting the daily limit.
On the other hand, the political developments dampened the rupee. The Indian currency, after touching a low of 42.85/86, ended about five paise lower against the US dollar. The rupee opened at 42.78/81 — from the previous close of 42.76 — touched the day’s low of 42.85/86, but it recovered partially on dollar selling spree by State Bank of India (SBI) and closed at 42.81 per dollar, showing a drop of five paise from the previous close.
The Reserve Bank of India also tried to arrest the rupee’s fall by resorting selling in forward dollars. “The rupee could weaken to the 43 level, but the Reserve Bank of India seems to be checking volatility through direct intervention, or through state-run banks. The central bank is sitting on a record levels of foreign exchange reserves which stood at $32.535 billion on April 1 against $31.586 billion in the previous week,” said a dealer.
Dealers say importer covering unlikely to be much as corporates already well covered, but dollar supplies seen contracting as exporters delay hedging receivables. The rupee has fallen by nearly 30 paise against the dollar after the political turmoil created nervousness in the foreign exchange market.
Bourses to remain open on Saturday
MUMBAI: Major bourses in the country will remain open on Saturday for special trading session to gauge the impact of the confidence vote in parliament which will decide the fate of the 13-month-old Vajpayee government.
Premier stock exchanges of the country like the National Stock Exchange and the Bombay Stock Exchange would be open for normal trading while others like Delhi Stock Exchange would also remain open.
