The benchmark Sensex plunged nearly 260 points at the closing trade on concerns over a broad government crackdown on suspected illegal offshore transfers and tax evasion after an unexpected regulatory order by the capital markets regulator.

Analysts attributed the move by the Securities and Exchange Board of India (SEBI) to a broad government crackdown on suspected illegal offshore transfers and tax evasion, although the regulator did not say what illegal activities the companies might have been engaged in.

The 30-share BSE index ended down 259.48 points or 0.8 per cent at 32,014.19 and the 50-share NSE index Nifty closed lower by 78.85 points or 0.78 per cent at 9,978.55.

Among BSE sectoral indices, realty index plunged the most by 4.53 per cent, followed by oil & gas 2.16 per cent, PSU 2.08 per cent and power 1.88 per cent, while only metal index was up 1.63 per cent.

Major Sensex losers were Dr Reddy's (-4.91%), Coal India (-2.67%), State Bank of India (-2.33%), ITC (-2.07%) and ICICI Bank (-1.7%), while the major gainers were Tata Steel (+2.63%), Cipla (+2.32%), Bajaj Auto (+0.82%), Bharti Airtel (+0.31%) and HUL (+0.17%).

Foreign portfolio investors (FPIs) sold shares worth Rs 199.21 crore yesterday, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth Rs 308.15 crore.

Valuation concerns

Concerns about valuations also weighed on markets. Indian stock markets have been on a record-hitting spree in the past month, with the NSE index breaching the 10,000-mark and the BSE index crossing 32,000 for the first time.

“There has been an initial panic,” said Neeraj Dewan, director, Quantum Securities, referring to the SEBI action.

“Markets are definitely stretched, they will correct at some time.”

Profit-booking

Investors booked profit in recent outperformers. Nifty PSU Bank index, which has risen nearly 23 per cent this year, lost as much as 2.8 per cent with Bank of India and Punjab National Bank leading the fall.

Energy stocks Indian Oil Corp and Bharat Petroleum Corp Ltd were among the top percentage losers, falling over 3.4 per cent and 3.7 per cent, respectively.

But, the Nifty Metal index rose as much as 3 per cent to its highest in over three years and was among the few indexes trading in the green. Strong quarterly results by Tata Steel Ltd and Novelis, a unit of Hindalco Industries , helped boost the sector.

Asian shares

Asian shares went flat on Tuesday as disappointing Chinese trade data clouded the otherwise upbeat outlook on global growth, leaving currencies and commodities becalmed in summer doldrums.

MSCI's broadest index of Asia-Pacific shares outside Japan gave up modest early gains to be barely changed, though it was still within a whisker of its recent decade high.

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