Mumbai: Equity markets closed deep in the red on Thursday after top government officials virtually ruled out a stimulus package for slowdown-hit sectors, triggering another round of selling in banking, auto and metal stocks. The 30-share BSE Sensex sank 587.44 points, or 1.59%, to finish at 36,472.93. The broader NSE Nifty slumped 177.35 points, or 1.62%, to 10,741.35. Both the key indices closed lower for the third straight session.
Chief Economic Adviser Krishnamurthy Subramanian on Thursday said using taxpayers' money to bail out companies going through a 'sunset' phase will create moral hazards and such a step is an anathema to the market economy. A weakening rupee, which hit its lowest level in eight months, and lacklustre global cues further weighed on investor sentiment, traders said. Power Secretary Subhash Chandra Garg also said low interest rates and availability of credit to private sector are better tools than a fiscal stimulus.
The comments have dashed hopes of some sort of a stimulus package from the government to boost growth and revive flagging consumer sentiment, analysts said. Yes Bank was the biggest laggard in the Sensex pack, plummeting 13.91%, followed by Vedanta, Bajaj Finance and Tata Motors, which declined up to 7.76%. ONGC, SBI, Hero MotoCorp, ICICI Bank, Tata Steel, HDFC twins and RIL also closed with losses. Tech Mahindra, TCS, HUL and HCL Tech were the only gainers, spurting up to 1.57%.
"Benchmark indices continue to remain weak with rupee hitting fresh lows and lack of news on the economic stimulus by the government... Investor sentiment was further dampened by statement made by Chief Economic Advisor that Indian economy doesn't need fiscal stimulus to tackle slowdown. "Besides policy uncertainty on the domestic front, weak global cues, foreign fund flow, currency and oil price movement would further determine the trend of the market," said Hemang Jani, Head - Advisory, Sharekhan by BNP Paribas. Speaking at an event in Delhi, Subramanian stressed on the cyclical nature of a market economy.
