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The Nifty and the Sensex shed 1.5 per cent on the Dravida Munnetra Kazhagam withdrawing support to the UPA coalition on Tuesday.
Twenty eight Bills are pending in the Lok Sabha and the Government needs to get them passed.
Fuelled by continuing Euro zone worries in Cyprus, RBI’s 25 basis point repo rate cut was on expected lines and could not curb the fall.
The Nifty closed at 5,746 down 89 points and the Sensex closed at 19,008, down 285 points.
Bearish catalyst
“The sensitivity of the solution in Cyprus has not been addressed as the general public has to be taken into confidence before imposition of any tax on bank deposits,” said K. Subramanyam, AVP — Institutional Research, Asit C. Mehta.
Traders said the Cobrapost expose on banks, summons to Bharti Airtel chief Sunil Mittal on spectrum allocation also acted as a bearish catalyst.
On Tuesday, FIIs were net buyers of equity worth Rs 63 crore and DIIs bought net equity worth Rs 71 crore. Retail investors on the BSE also bought net equity worth Rs 68 crore while brokers offloaded equity in the net on their proprietary trading book worth Rs 81 crore.
All the broader indices on the NSE and the BSE closed in the red on a day of high volatility. The volatility index, India VIX, closed at 16.71 up 5.43 per cent.
Rate cut disappoints
The rate cut was also not a confidence booster as the RBI did not touch the CRR, said experts.
The Monetary Policy statement remained relatively more hawkish than one would have expected in the midst of a rate cutting cycle. This clearly re-establishes concerns on fiscal gap, current account gap and the continuing high inflation pressures said Indranil Pan, Chief Economist, Kotak Mahindra Bank.
“On the basis of the above, we pencil in just another 25 bps cut in the repo rate by the RBI on May 3,” he added.
Both the Bank Nifty and the BSE Bankex shed close to two per cent as a result.
> raghavendrarao.k@thehindu.co.in
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