Paring some of its early losses, the BSE benchmark Sensex was quoting down by 224.42 points during mid-session on Tuesday, after the DMK announced its withdrawal of support from the ruling UPA government over the issue of alleged human rights violations of Tamils in Sri Lanka.
After commencing the day on a strong note with gains of over 83 points, the 30—share index plunged by 350.32 points to fall below the 19,000—level to 18,942.88 at 1130 hrs.
However, it recovered part of the losses to trade at 19,068.78, still down by 224.42 points at mid—session after Finance Minister P Chidambaram asserted there is no crisis and that government enjoyed majority and it was “absolutely stable“.
On similar lines, the Stock Exchange index Nifty moved between 5,863.60 and 5,724.30 and was trading down by 70.90 points to 5,764.35 at 1300hrs.
Brokers said the market sentiment was battered on reports of the ruling UPA government’s key ally DMK pulling out its support, which came close on heels of RBI policy announcement.
The RBI today cut its short-term lending rate by 0.25 per cent to spur growth and revive investment but sounded a note of caution on further easing of rates on account of high food inflation and current account deficit.
They said the market partly recovered as domestic funds came in for rescue and Mr Chidambaram assuring that there is no threat to the government.
The fall in the market was led by stocks of realty, metal and banking sectors, with losses of up to two per cent. The 30-share index, which opened in positive zone, fell by 350.32 points, or 1.82 per cent to trade at 18,942.88 at 11.30 am (IST) after RBI left cash reserve ration (CRR) unchanged at 4 per cent and announced a cut in short-term lending, repo, rate by 0.25 per cent to 7.5 per cent.