Indian stocks tracked weak global markets, which saw sharp selling amid fears that Spain might need a bail out after one of its regions said it might seek financial aid Friday. Spain's 10-year borrowing rate rose to the highest level since the euro was established in 1999. Its stock index IBEX traded 5.3 per cent lower at 03.45 p.m.
Markets in France and Britain were down 1.7-2.2 per cent. Earlier, the Hang Seng index closed 3 per cent lower, while Japan's Nikkei index declined 1.9 per cent.
Rohit Midha, market strategist at Atlas Capital Markets & Advisory Services told NDTV Profit that markets may be weak from hereon.
"Global factors have come to the fore again unfortunately. Domestically, political uncertainty is growing as evident by the latest move by the Samajwadi Party."
The Samajwadi Party, which has emerged as a key ally of the ruling UPA coalition, wrote to the Prime Minister yesterday urging the government not to open up retail trade to Foreign Direct Investment (FDI). That move also sent retail stocks sharply lower. Shares in Pantaloon Retail plunged 8 per cent today.
Metal stocks saw the deepest cuts, falling 3.3 per cent, on account of renewed global concerns. That's because commodity prices decline when global economy slows. Sterlite, Hindalco and Sesa Goa closed 4.5-5.5 per cent lower. Power, realty, and auto stocks saw 2-3 per cent cut.
On the Nifty index, 48 of the 50 stocks closed lower. Maruti Suzuki, India’s biggest car maker was the top loser, closed at the day’s low falling 6 per cent. The company has declared a lockout at its Manesar plant, which saw a violent protest by the workers last week. The Manesar plant accounts for a third of Maruti's production, and the management has given no time line on when the factory would start functioning.
Drug maker Dr Reddy's and Cipla were the only stocks to close higher on the Nifty. Healthcare stocks are considered defensive bets in a falling market.
Among other news driven stocks,
Reliance Industries fell 0.5 per cent despite surpassing Q1 estimates. Reliance reported a decline in net profit for the third straight quarter. L&T, India's largest engineering and construction firm, met Street expectations in the June quarter. The stocks closed 0.9 per cent lower. Wipro, which will report numbers on Tuesday, declined 1.9 per cent.
The market breadth was weak with 408 of the BSE 500 stocks trading lower today.
Despite sharp cuts, analysts did not discount the possibility of a rebound in the short term.
"For past 1 year, the 200 daily moving average, currently at 5,100 has given a good reversal point. So, rewards on the short side should start shrinking from these levels. If the Nifty moves above 5,150, there are chances of a rebound," Shubham Agarwal, AVP & senior technical analyst at Motilal Oswal Securities said.
(With inputs from AP)