Sensex nosedives 400 points on US budget impasse woes

With the threat of US Government shutdown looming large, global markets nosedived and this had a negative impact on the Indian bourses.

Global markets worldwide were circumspect ahead of the September 30 deadline for the US to increase its debt limit to fund government expenditure.

With the Democrats and the Republicans unrelenting on the Obamacare issue, the possibility of shutdown of the US Government has had a negative impact on the global markets.

What has added further to the uncertainty is the political turmoil in Italy where the survival of the Government is at stake.

The US Government appeared headed for a partial shutdown on Monday after the Republican-controlled Lower House approved a Budget Bill that Democrats in the Senate and the White House vowed to reject.

A Government shutdown would be the first since 1996 and would begin on Tuesday, the first day of the new fiscal year, unless lawmakers find a last-minute solution in Monday's session.

The Sensex plunged 400.36 points or 2.03 per cent at 19,326.91 and the Nifty shed 111.55 points or 1.91 per cent at 5,721.65.

Barring IT, all other BSE sectoral indices were trading in the red. Capital Goods, Banking, Metal and Realty indices succumbed to heavy selling pressure and were down 2.92 per cent, 2.84 per cent, 2.44 per cent and 2.09 per cent, respectively.On the other hand, IT index was up 0.06 per cent

Among major gainers, HUL was up 1.06 per cent at Rs 627.40, Sun Pharma 0.47 per cent at Rs 592.55, Infosys up 0.3 per cent at Rs 3,015.45, NTPC 0.27 per cent at Rs 148.20 and GAIL up 0.09 per cent at Rs 326.70.

Among the major losers were Tata Steel, BHEL, ICICI Bank, Coal India and L&T. Tata Steel was trading down by 7.03 per cent at Rs 267.70, BHEL lost 4.72 per cent to trade at Rs 137.15, ICICI Bank down 4.12 per cent at Rs 885.25, Coal India lost 3.71 per cent at Rs 295.65 and L&T 3.44 per cent at Rs 789.30.

US Treasury Secretary Jacob J. Lew in a follow-up letter to the Speaker, US House of Representatives, urged the Congress to allow an increase US borrowing capacity to fund its social security and healthcare expenditure.

“If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history,” Lew said.

Referring to the US credit rating downgrade in 2011, he said: “If Congress were to repeat that brinksmanship in 2013, it could inflict even greater harm on the economy.”

Rajesh Agarwal of Eastern Financiers said that the HSBC manufacturing and services PMI and auto sales numbers would set the tone for this week’s market movement.