Sensex closes 587 points down on weak GDP data

MUMBAI: Renewed fears about the slowing Chinese economy, combined with the less-than-expected doemstic GDP growth for June quarter, spooked Dalal Street investors on Tuesday. As a result, the sensex lost 587 points (or 2.2%) to close at 25,696 with 29 of the 30 of its components in the red. On the NSE, nifty lost 185 points (2.3%) to close at 7,786. Some new data showed that Chinese economy was slowing at a much faster rate than earlier seen which spooked markets in Asia and Europe on Tuesday. Weaknesses in these markets also affected sentiment in India, market players said.

Surprisingly HDFC Bank’s 35 basis points (100 basis points = 1 percentage point) cut in lending rates on Monday is being seen negatively by the street. Dealers said such a cut in rates by one of the leading banks will force others to follow suit which in turn would mean lower net interest margin (NIM) for all banks. However, investors are ignoring the positives from lower rate of interest, something that all the corporates and industry trade bodies have been demanding from the RBI and the government for months now, they said.

As a result of the negative sentiment for banks, Axis Bank closed 5.2% lower, while SBI, leader in the segment closed 3.2% lower. Bankex, BSE’s banking index, closed 3.6% lower, which was also the top laggard among all sectoral indices. It was followed by 3.2% drops in each of the metal and real estate indices.