Mumbai: The 30-share Bombay Stock Exchange index was down 440 points as Finance Minister P. Chidambaram unveils the annual Budget, and the 50-share National Stock Exchange index also dropped 2.38% to 3,801.05, led by technology and cement stocks. In early trade, stocks were down 5%, mirroring a sell-off in equity markets worldwide.
Besides feeling jittery over the budget announcement, investors are also concerned over the possibility that overseas investors will sell shares after a global sell-off sparked by the biggest plunge in Chinese shares in a decade.
The Reserve Bank increased its overnight lending rate for the fifth time in a year on 31 January to a four-year high of 7.5% to help slow inflation to within its estimated range of 5% to 5.5% in the fiscal year ending 31 March.
India’s benchmark inflation rate held near a two-year high at 6.63% for the week ended 10 February.
Overseas investors sold a net Rs5.82 billion worth of stocks on 26 February, according to the latest information on the Securities & Exchange Board of India’s Web site.
In the US, the Dow Jones Industrial Average dropped as much as 546 points, the most since the first trading day after the 11 September 2001, terrorist attacks. Chinese stocks yesterday fell the most since 1997 after the government took measures to crack down on excess speculation that had driven shares to records.
India said on Wednesday it was raising spending in its annual budget on health and education and focusing on boosting the flagging agricultural economy in a drive to ensure growth included hundreds of millions of poor.
The partially convertible rupee fell in early trade as investors worried about an emerging market sell-off but pulled off its low to reach Rs44.29 per dollar later in the session.
The rupee also is poised to snap a six-month winning streak on speculation the Reserve Bank of India stepped up purchases of dollars to prevent a stronger rupee from hurting growth in exports.
India, the world’s second largest producer of wheat and rice, banned new futures trading in the two commodities with immediate effect today, to curb the fastest inflation in two years.
No Futures Trading
Trading will stop once existing contracts expire on the nation’s three exchanges including the Mumbai-based National Commodities & Derivatives Exchange Ltd, in which Goldman Sachs Group Inc. has a stake, Forward Markets Commission said today.
The ruling Congress party-led coalition faces an opposition that’s attacking Prime Minister Manmohan Singh’s government for spiraling prices of farm products. Trading in wheat, rice, sugar and pulses has inflated product prices, the Communists, which support the federal government, and other parties have said.
“Mounting political pressure to combat inflation seems to have promoted the government to take this drastic step,” said Kishore Narne, head of research at Anand Rathi Commodities Ltd., a brokerage in Mumbai. “Trading volumes in other agriculture commodities will also dry up.”
Wheat for March delivery fell as much as 1% to Rs947 per 100 kilograms on the National Exchange. Contracts for June and July declined 2.8% and 2.4% respectively. Before today, wheat had gained 26% in the past 10 months, tracking a 35% gain on the Chicago Board of Trade.
The National Commodities bourse accounts for 95% of all wheat futures traded in India. Wheat makes up just 1% of the bourse’s daily turnover of Rs35 billion, Managing Director P.H. Ravikumar said today.