Sensex hits two month low on spectrum row; sheds 345 pts

Dalal Street tumbled to a two-month low on Friday with the BSE benchmark Sensex declining over 345 points on intense selling amidst the political uncertainty triggered by the 2G spectrum row. After an extremely volatile session,the Bombay Stock Exchange closed 1.73 per cent to settle at 19,585.44. The last time Sensex closed near today’s level was at 19,594.75 on September 17. Similarly,the National Stock Exchange’s broader index Nifty also lost 108.50 points to finish trade at 5890.30. Key indices have lost a steep 7 per cent in the past two weeks. The fluid political situation in the wake of 2G spectrum controversy dampened the investor sentiment,dealers said.“Concerns about the simmering political tension over the 2G spectrum scam coupled with persistent selling by FIIs hurt the sentiment. In fact,the Indian market was the big loser today in Asia despite the markets in China and Hong Kong staging a smart comeback in late trading. One now has to see if FIIs continue to pull out money from India or will start buying at lower levels. One has to closely follow the global cues,” said Amar Ambani,research head at IIFL. “The Supreme Court move to seek an explanation from the Prime Minister on the 2G scam created some nervousness. The market was agog with all types of rumours. Stocks of companies liked Reliance Communications,Videocon and Unitech named by the CAG bore the brunt of selling,” said BSE dealer pawan Dharnidharka.On the other hand,world stocks — London’s FTSE was down 1.4 per cent and Wall Street opened lower — declined and commodities fell on Friday as China raised banks’ reserve requirements amidst hopes of an Irish bailout and its broader implications for euro zone debt. Beijing and Hong Kong unveiled a raft of measures to curb rising prices as both governments struggle to curb inflationary pressures in their economies.

The Chinese central bank on Friday raised capital reserve requirements for its banks by 50 bps to 18.5 per cent for the fifth time this year in order to “appropriately control” credit and liquidity. The Hong Kong government significantly raised the stamp duty on residential property transactions to damp property speculation.

According to dealers,there was profit-booking by edgy investors after the government’s probe into alleged irregularities in the award of 2G spectrum licences sent stocks of Reliance Communications and Videocon Industries plunging by 3.57 per cent and 8.6 per cent respectively. Realty giant Unitech,which has a telecom joint venture with Norway’s Telenor,too skid by 4.56 per cent.

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“Investors also pulled out money from the banking stocks,which are exposed to microfinance. Also,a weak opening in European market further dampened the sentiment in the second half,” said a dealer.

Reliance Industries,which fell 3.46 per cent to Rs 996.85 was a major contributor to the overall market fall. Frontline banking stocks were the worst hit,with the country’s largest lender SBI shedding 2.37 per cent. Private sector lenders ICICI Bank and HDFC Bank too slipped by 1.37 per cent and 1.92 per cent,respectively. Reliance Infra tanked by 5.25 per cent,becoming the biggest loser on the Sensex.