Rising oil prices played havoc with stock market sentiment as both the benchmark indices ended the day down around three per cent, making India the worst performing market globally at closing time on Monday.
The BSE Sensex ended the day at 17,445, down 477 points from its previous close. The NSE Nifty closed at 5,281, down 148 points. Such a heavy decline in the Indian indices was last seen three months ago, in November.
Crude oil had touched $125 per barrel over the weekend and will likely continue rising.
“Crude oil prices are likely to remain high in the short term. If that happens, inflation will also move up further, perhaps stalling the RBI's rate-easing policy,” said Mr Alex K Mathews, Head, Technical and Derivatives Research, Geojit BNP Paribas Financial Services.
Also, the market had entered the over-bought zone last week and what is being witnessed today is probably profit-booking by the investors, he added.
The market continued to slide during the day as oil prices refused to recover and hovered around $124 a barrel.
The lowest the Sensex touched during the day was 17,381, down 541 points (3.02 per cent) from its previous close.
Its highest point in the day, 17,975, was also its opening value on Monday.
Persisting uncertainty
Mid- and small-cap indices fell more than the benchmark indices. The BSE mid-cap index fell three per cent, while the small-cap index fell 3.3 per cent.
The mid- and small-cap stocks had declined in the last four-five days. However on a year-to-date basis they have gained, said analysts.
Market experts say that, at this point, uncertainty was a given in the markets as debt crisis woes continue to plague the European economy. “LTRO-II is likely to come up on Wednesday, and FII flows will depend on this. FIIs have also seen some amount of profit-booking. Retail investors have participated but HNIs have largely stayed away from the action,” said Mr Dipen Shah, Head of Fundamental Research, Kotak Securities.
The results of the second Long-Term Refinancing Operations (LTRO-II) by the European Central Bank will be announced on Wednesday and will likely involve refinancing to the tune of €400-500 billion.
The first LTRO concluded in mid-December 2011. A refinance operation refers to an auction mechanism in which the amount of liquidity to be auctioned is specified by the ECB and banks are asked for expressions of interest.
FIIs were net buyers at Rs 329 crore on Monday, while domestic institutions were net sellers at Rs. 699 crore on both the exchanges.
On the BSE, the retail segment bought shares worth Rs 110 crore in the net.
Heaviest declines
The sectors that saw the heaviest declines were realty, metal, power, banking, capital good, consumer durables, auto and oil and gas, each of which fell more than three per cent.
Among the Sensex-30 stocks, Tata Steel dropped the most, by seven per cent. Hero MotoCorp was the second worst performer, down 6.6 per cent.
Hindalco, DLF, Jindal Steel, BHEL, ICICI Bank, Reliance Industries Mahindra & Mahindra were all down around five per cent.