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Tuesday 11 December 2018

Sensex drops nearly 500 points, Nifty50 below 10,350; top factors that dragged markets lower - 11 Dec 2018 @TheGRSsolution


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NEW DELHI: Domestic stocks plummeted and headline indices Sensex and Nifty suffered severe blows in the opening trade on Tuesday in the wake of RBI Governor Urjit Ptael's resignation, while investors appeared jittery ahead of assemply polls results. 

The sudden resignation of Patel on Monday evening surprised participans and fund managers, brokers and analysts said the market’s prospects will hinge on investors’ perception about the next governor. 

The domestic currency plunged to 72.44, its lowest level in four weeks. 

The early leads of assembly results indicated a tight fight between the BJP and Congress in Madhya Pradesh and Rajasthan and Chhattisgarh was seen tilted in the favour of the Congress. 

Sensex plunged 500 points in the early trade, while Nifty touched 10,335. 

Around 9:25 am, the Sensex kitty was 457 points or 1.31 per cent, down at 34,502, while the Nifty was at 10,373, down 115 points or 1.10 percent.

BSE Midcap and Smallcap indices were 0.57 per cent and 0.50 per cent down, respectively. 

All sectoral indices were incurring losses at that time. Let's take a look at what caused pain to market. 

Sudden resignation by Governor

Market sentiment got affected after the surprised resignation by the Reserve Bank Governor Urjit Patel on Monday, four days ahead of a crucial meeting of the board of the central bank that could have discussed issues of simmering differences with the government. “We think both the RBI and the government are right on various issues, but the sudden resignation will lead to questions about whether the government is trying to stifle institutions and whether the resignation is a statement to protect the RBI’s independence. This, along with the lack of policy coordination between the RBI and the government, will mean higher India risk premium, at least in the short term, in an environment where domestic political uncertainty is anyway on the rise owing to the elections scheduled in Q2 2019,” Nomura said. 

Brokerage firm HDFC Securities’ VK Sharma said the resignation can “knock off” 200 points from the Nifty, which corrected by 1.92 per cent to close at 10,488.45 points on Monday primarily due to fears of the ruling BJP getting trounced in the state elections Tuesday. 

State election results

State election outcome will continue to keep investors cautious on Dalal Street on Tuesday. With exit polls predicting a close call for the ruling BJP in three major states — Rajasthan, Madhya Pradesh and Chhattisgarh — traders have mostly discounted a poor showing by the incumbent party. The BSE Sensex on Monday settled 713.53 points down at 34,959. 

Falling rupee 

The rupee on Tuesday plunged 112 paise to 72.44, it's four-week low, against the US dollar following RBI governor Urjit Patel's resignation. 

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