Mumbai: Shares nosedived on Tuesday as the DMK party's decision to pull out of the ruling UPA rattled investors, overshadowing the Reserve Bank of India's move earlier in the day to cut the benchmark repo rate by 25 basis points. The 30-share BSE Sensex crashed 285.10 points to end the day at 19008.10, and the 50-share Nifty fell 89.30 points to finish at 5745.95.
This is the largest single day fall in the Sensex since February 28. The latest political development has raised the spectre of an early general election, and has cast doubts on the recent economic reforms initiated the by the government.
"In the near term, we expect the government to shift its focus to managing coalition partners," said a note by brokerage house Ambit. "Some reform legislation will still be passed, but with the general elections due by May 2014, we expect political uncertainty to resurface in H2 FY14 (year ending March 2014) and politics to trump economics," the note said.
The latest political development has cast doubts on the recent economic reforms initiated the by the government.
Realty, capital goods, metal and banking shares were among the worst hit, as investors flocked to the safety of defensive sectors like pharma and fast moving consumer goods.
Adding to the bearish mood was the downtrend in global markets, and the 2G trial court summoning Bharti Airtel founder Sunil Mittal in the additional spectrum allocation case.