The BSE Sensex found itself on a sticky wicket on Monday, which fell a huge 551 points to 27,561.38, an over 5-week low, amid fears over stricter norms on participatory notes (PNs) and a Chinese stock rout.
Nifty met with the same fate, down 161 points. There was heavy selling all around as investors went around booking profits following <g data-gr-id="43">a SIT</g> report that Sebi should do more to identify end beneficial owners of P-Notes (PNs) and restrict their transfer.
Market players felt the move would hit investments. PNs are a popular offshore derivative instrument used by overseas investors to invest in Indian stocks. Other Asian markets did no better, which ended in the red due to worries that China is headed for a sharp slowdown despite the government’s efforts to revive it. The Shanghai Composite plunged as much as over 8 <g data-gr-id="35">per cent</g>.
Further weakness in the rupee against the dollar made things worse. Starting lower, the 30-share gauge broke below the crucial 28,000-level before ending at 27,561.38, down 550.93 points, or 1.96 <g data-gr-id="33">per cent</g>, its biggest single-day fall since June 2.
The NSE Nifty slipped below the 8,400-mark to settle at 8,361, down 160.55 points, or 1.88 per cent. Intra-day, it shuttled between 8,351.55 and 8,492.20. Tata Steel lost most (5.17 per cent), followed by Hero MotoCorp. Of the 30-share Sensex pack, 29 ended lower. Only Bajaj Auto gained.
Sectorally, shares of metal, capital goods, banking, power, realty, auto, oil and gas and IT all suffered losses.
Broader markets <g data-gr-id="40">mid-cap</g> and small-cap indices didn’t escape the selling pressure, which closed lower 1.38 per cent and 1.07 per cent, respectively.
Globally, Hong Kong’s Hang Seng closed 3.09 per cent lower while Japan’s Nikkei slumped 0.95 <g data-gr-id="34">per cent</g>. European markets slid for the fifth day.
US stocks, too, edged lower last Friday after a report showed that sales of new single-family homes dropped to the slowest pace in seven months, suggesting that the housing market is still feeling the recovery pain.
No knee-jerk reaction on <g data-gr-id="50">P-note</g> curbs: FM
Seeking to soothe jittery investors, government on Monday said it will not react in a “knee- jerk” manner to SIT recommendation on checking inflow of overseas investments via P-Notes, assuring that no action will be taken which adversely impacts the investment climate. Finance Minister Arun Jaitley said a considered view will be taken on the Supreme-Court appointed SIT recommending stronger measures to identify owners of Participatory Notes (P-Notes) to check black money.
The comments came as stock markets slumped over 580 points and rupee slid to 64.15 to a dollar as investors saw any government action against P-notes as hurting genuine foreign investments. “It is too early to say what view the government would take. But it will certainly not take any such action in a knee-jerk reaction, particularly one which has any adverse impact on <g data-gr-id="79">investment</g> environment,” Jaitley told reporters in his Parliament House Office.
Separately, Revenue Secretary Shaktikanta Das said there is no need to “panic” and the Finance Ministry will take a view on the SIT suggestions only after consultations with Sebi, <g data-gr-id="84">RBI</g> and other institutions. “At the moment there is no need to panic. We will take views after consultation with stakeholders including Sebi, <g data-gr-id="83">RBI</g> and related institution... There is no need for markets to react in any particular manner,” he said. The SIT had last week suggested to Sebi to put in place regulations that will help identify individuals holding P-Notes or offshore derivative instruments (ODIs), and take other steps required to curb black money and tax evasion through the stock market route. P-Notes are used by a large number of foreign investors to park funds in the equity market without disclosing their identity to the market regulator Sebi. A similar recommendation in 2007 had triggered a major collapse in the stock market, prompting the then Finance Minister P Chidambaram to announce that no such measures would be taken by the government. Minister of State for Finance Jayant Sinha said the market should not over-react to P-Notes issue and there was no need for investors to panic.
‘RBI Guv’s powers won’t be curbed without consulting stakeholders’
The government will consult stakeholders including the Reserve Bank before <g data-gr-id="118">firming</g> its views on a draft bill that seeks to limit the central bank’s authority in setting interest rates. Finance Minister Arun Jaitley said the government will take a view on the revised draft of the Indian Financial Code -- which favours creation of an interest rate-setting panel where a majority (out of its 7 members) is nominated by government -- only after receiving comments from stakeholders. The Chief Economic Adviser Arvind Subramanian has already dubbed the IFC draft as merely <g data-gr-id="119">a FSLRC</g> report, not reflecting government views.
“FSLRC has made its recommendations, which have been made public for comments. After the comments are received, it is only then that the government will take a view,” Jaitley told reporters here. Known as the Indian Financial Code, the draft bill, on which comments are due by August 8, is meant to unify various laws that govern the country’s financial markets.
`Rs slides 12P against $
Extending losses for the fourth trading session, the rupee on Monday fell by another 12 paise to close at a new 6-week low of 64.16 per dollar on persistent demand for the US currency from banks and importers amid a massive plunge in equities.