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Sensex Plunges Below 17K Level
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Investors in India are facing the prospect of a double whammy, as the euro zone debt crisis looks set to continue given growing worries Spain will need a sovereign bailout, while the global economy continues to show signs of weakness.
At home, investors are starting to grow concerned the government may not be able to deliver substantial policy reforms after last week's presidential elections, threatening to undo the strong gains in Indian stocks seen last month.
Retail stock such as Pantaloon slumped on Monday following media reports some government coalition members are opposing allowing foreign direct investment into multi-brand outlets.
"In my view, time is up, and now nothing concrete can be expected from this government for a long time," said Vijay Kedia, director at private wealth management firm Kedia Securities.
"India now needs fast and constant changes in policy in tandem with global changing scenario, which this government will not be able to implement till next election," he added, referring to general elections in 2014.
The Sensex fell 1.64 per cent to 16,877.35 points, marking its biggest fall May 16 and its second consecutive session of falls.
The Nifty lost 1.67 per cent to end at 5,117.95 points.
Shares in Indian retailers were among the day's big decliners on media reports that government coalition members Samajwadi Party and leftist parties had written to Prime Minister Manmohan Singh to oppose opening up foreign investments into multi-brand retail outlets.
Pantaloon Retail dropped 8 percent. Shares in India's biggest retailer had surged 26.4 percent since the end of May to Friday's close, mainly on hopes the government would revive the FDI proposal after shelving it late last year.
Shoppers Stop fell 4.8 per cent.
Among other decliners, India's Reliance Communications dropped 3 percent after the debt-laden telecoms carrier shelved an initial public offering by its undersea cable unit in Singapore that was aimed at raising as much as $1 billion.
Maruti Suzuki shares slumped 5.9 per cent as its Manesar plant remained shut after last week's violent clash between managers and workers.
Shares in Crompton Greaves fell 9.2 per cent after saying April-June net profit rose 8 per cent to Rs 85.9 crore, missing expectations and raising worries about whether the Indian power equipment maker can meet its yearly guidance.
Among companies reporting earnings results on Monday, Larsen & Toubro initially fell as much as 3.2 per cent after reporting its quarterly profit met expectations, as investors had initially worried about EBITDA margins.
Subsequent comments from management, including about sustaining revenue growth, sharply pared the losses and the stock ended down 0.9 per cent.
Shares in Indian Bank rose 1.5 per cent after the state-run bank reporting April-June non-performing assets rose to a lower-than-expected 1.04 per cent.