A move by Cyprus to tax account holders of banks hammered stocks, money and commodities markets across the globe on Monday.
In India, the Sensex, rupee and other commodities barring precious metals fell.
Cyprus decided to impose a levy ranging from 6.75 to 9.99 per cent on those holding accounts in its banks after striking a deal with the European Union Finance Ministers on Saturday. The tiny European nation, that contributes less than 0.5 per cent to European production, has to raise 5.8 billion euros as part of the bailout plan.
Though reports later in the day talked of Cyprus planning to impose the levy on those holding over 100,000 euros in their accounts, the markets were still unimpressed.
The action now moves to Cyprus Parliament that will have to ratify President Nicos Anastasiades’ plan to mop up the required money.
Fear also struck the market since Russians money make up a sizeable amount of the funds in Cyprus banks.
Sensex opened 160 points lower in the morning but after a volatile session ended 134.36 points down at 19,293.20. Nifty fell by 37.35 points to 5,835.25.
Prospects of a rate cut by the RBI in Tuesday’s policy meeting failed to enthuse markets as players were intent on booking profit.
London’s FTSE dropped 0.75 per cent, Germany’s Dax over one per cent and Europe’s CAC 1.25 per cent. In Asia, Japan’s Nikkei, Hong Kong’s Hang Seng all fell over 2 per cent and Singapore’s Straits Times index nearly one per cent.
Gold was the only gainer as its spot price climbed above $1,600 an ounce to $1,603.44, while gold futures for delivery in April rose to $,1602.50. Other precious metals fell.
Copper and aluminium fell over one per cent in the global market, while zinc, tin and nickel too dropped.
The Cyrpus effect dragged Brent oil below $110 a barrel to $108.55, while other crude oil products too dropped, barring natural gas.
Soyabean dropped to $14.10 a bushel and crude palm oil on Bursa Malaysia Derivatives Exchange slipped to 2,399 ringgit ($766) a tonne.
Other agricultural commodities, too, fell across the globe and board.
In the money market, the euro dropped by over one per cent against the dollar. The Indian rupee fell to 54.22 against the dollar, while the yen gained against the greenback.