MUMBAI: Traders pressed the panic button towards the fag end of the session Thursday, after reports suggested that below-than-expected rainfall
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may force the government to declare some states as drought-hit. Rainfall for the week to August 5 stood at 23.5 mm, which is 66% below normal, media reports suggested. This is seen as a major concern for economic growth.

“The monsoon problem appears to be more severe than policymakers had anticipated. The government may now have to allocate more funding, possibly via subsidies and loan waivers, to support struggling farmers. Meanwhile, authorities are also under pressure to ensure food security by building up reserves, which will add to this year’s fiscal outlay. The bid to contain the damage caused by insufficient monsoon rains and maintain social stability has made fiscal management difficult. The budget deficit for fiscal 2009-2010 is likely to be larger than the government’s current estimate,” said Sherman Chan, economist at Moody’s Economy.com.

National Stock Exchange’s Nifty settled at 4585.75, down 2.31 per cent or 108.4 points from the previous close. The index slipped to a low of 4559.20 from a high of 4718.15.

Bombay Stock Exchange’s Sensex declined 2.45 per cent or 389.80 points to 15,514.03. The index crashed to a low of 15,443.22 from a high of 15,969.81.

“Global markets painted a firm picture so the sell-off was clearly driven by domestic concerns such as below-normal rainfall. In any case, the market had run up sharply in the last few days so a correction was definitely on the cards,” said Sunil Jain, head of research at Nirmal Bang Securities.

Moreover, the 30-share Sensex was within kissing distance of the psychological 16000 level – a critical resistance. Traders began booking profits close to those levels but the rainfall reports triggered the massive sell-off.

The broader market ended on a weak note as well. The BSE Midcap Index was down 2.39 per cent while BSE Smallcap Index climbed 1.29 per cent.

All sectoral indices ended in the negative terrain but the worst hit was the BSE Auto Index down 4.43 per cent, followed by BSE Realty Index shedding 3.65 per cent and BSE FMCG down 3.29 per cent.

Among frontline stocks, Tata Motors (-6.93%), Hindalco Industries (-6.5%), Jaiprakash Associates (-5.53%), Maruti Suzuki (-5.34%) and Hero Honda (-5.25%) were under severe pressure.

Sun Pharmaceuticals (1.53%) and Wipro (0.04%) were the only gainers in the 30-share index.

Market breadth on BSE worsened with 1614 declines outnumbering 1080 advances.

source: Economictimes

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