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 threat of US Government shutdown looming large, global markets plunged and this had a negative impact on the Indian bourses with the Sensex trading down 257.31 points or 1.3 per cent at 19,469.96 and the Nifty trading down 73.85 points or 1.27 per cent at 5,759.35.
Barring IT, all other BSE sectoral indices were trading in the red.
Capital goods, metal, PSU and banking sector stocks succumbed to heavy selling pressure and were down 2.86 per cent, 2.8 per cent, 2.75 per cent and 2.48 per cent, respectively. Only IT sector stocks were up 0.58 per cent.
Among major gainers, HUL was trading at Rs 628.25, up 1.19 per cent, Wipro gained 0.96 per cent at Rs 479.70, Infosys gained 0.72 per cent to trade at Rs 3,028, Bajaj Auto up by 0.31 per cent at Rs 1,998.40 and Sun Pharma gained 0.18 per cent to trade at Rs 590.80.
Among the major losers were Tata Steel, BHEL, Bharti Airtel, ICICI Bank and ONGC. Tata Steel was trading down by 5.52 per cent at Rs 271.95, BHEL lost 5.35 per cent to trade at Rs 136.25, Coal India lost 4.07 per cent to trade at Rs 294.55, ICICI Bank down by 3.65 per cent at Rs 889.60 and ONGC shed 3.62 per cent to trade at Rs 264.55.
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.
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.
Japan's Nikkei shed 262.99 points or 1.78 per cent to 14,497.10, Hong Kong's Hang Seng plunged 282.81 points or 1.22 per cent to 22,924.20 and Australia's S&P/ASX 200 lost 88.16 points or 1.66 per cent to 5,218.90.
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