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Political chaos weigh on Indian bourses; Markets lose 1.5%

Posted on Tuesday, 19 March 2013

Major headlines
  • RBI cuts Repo Rate by 25 bps; CRR unchanged
  • Sun TV falls on political uncertainty
Indian indices
The key indices opened higher today but kept swinging between gains and losses post RBI policy announcement. Heavy selling in index heavyweights and banking stocks dragged markets lower. Markets witnessed steep fall in late morning trades with the Sensex plunging below 19,000 amid political uncertainty after the DMK began withdrawing support to the ruling United Progressive Alliance. According to reports, five DMK ministers seem to have resigned. RBI's rate cut was also ignored as investors sentiments were dampened by domestic chaos. The broader markets too ended in red leading to weak market breadth. The BSE Midcap index declined 1.37%, while the BSE Smallcap index fell 1.57% in trade today.

Major events:
  • The Reserve Bank of India in its mid-quarter policy review (Jan-March) reduced Repo rate by 25 bps to 7.5%, in line with estimates. The RBI lowered the repo rate today for the second time this year in a bid to help revive growth in Asia's third-largest economy, but warned that the scope for further easing is limited. However, the other key rates - CRR and reverse repo rate remained unchanged.
  • The DMK pulled out of the Congress-led UPA coalition on Tuesday in protest against the government's position on a U.S.-backed United Nations resolution on war crimes carried out during Sri Lanka's civil war.

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