Nifty plunges below 5500 on political instability

Political instability due to pull out by DMK party from the ruling coalition dragged the benchmark Nifty below the 5500 level and the Sensex hammered by 250 points. NYMEX crude oil prices above the USD 105 a barrel too added more pressure on the markets. London Brent crude was trading above the USD 117 a barrel.

The Dravida Munnettra Kazhagam (DMK) pulled out of the United Progressive Alliance (UPA) after seat-sharing talks for the Tamil Nadu elections broke down.

Congress' demand for 63 seats shows they don't want alliance, says DMK, which has 18 seats in the Lok Sabha.

Political analyst Yogendra Yadav said that the UPA will fall short of majority if DMK withdraws support. "Anti-UPA is not in majority even if DMK withdraws support," he said.

According to him, the UPA-DMK alliance cannot be assumed to have broken down as DMK will provide issue-based support to UPA and it is unlikely that UPA will rush into alliance with Samajwadi Party (SP).

Among frontliners, BPCL, M&M, Axis Bank, ICICI Bank, SBI, Jaiprakash Associates, Suzlon, L&T, Reliance Power and Reliance Industries and ONGC were under selling pressure.

However, Cairn and PNB were gainers in early trade.

At 9:17 hours IST, the 50-share NSE Nifty tanked 62 points to 5,477 and the 30-share BSE Sensex fell 181 points, to trade at 18,305.

Breadth was in favour of declines - about 143 shares advanced as against 640 shares declined on National Stock Exchange. The CNX Midcap slipped 85 points or 1.2% to 7,568.

Midcap & Smallcap space:

IVRCL Infra and GVK Infra slipped 2.5% each.

Punj Lloyd tanked 5%.

DB Realty was down 1%. The company accepted resignation of MD Shahid Balwa and director C Bhattacharya.

Oil marketing and aviation companies were down on rising oil prices. IOC, Jet Airways and Kingfisher plummeted 2-4%.

Sun TV tumbled 5%.

Essar Shipping was up 4% and Hotel Leela up 4%

_PAGEBREAK_

Global cues:

The US markets managed to recover from day's low in last half an hour of trade on encouraging jobs report and spiralling crude oil above USD 105 a barrel - a new two-year highs.

The Dow Jones Industrial Average ended down 88 points or 0.72% at 12,170, after seeing recovery of 91 points from day's low of 12,079 on Friday. It was up 0.33% for week and up 5.1% YTD.

The Nasdaq Composite was down 14 points or 0.5% at 2,785, after seeing recovery of 17 points from day's low of 2,768; it was up 0.13% for week and up 5% YTD.

The S&P 500 Index fell 10 points or 0.74% at 1,321, after recovery of 9 points from day's low of 1312; it was up 0.10% for week and up 5% YTD.

Asian markets opened down; Nikkei was down 1.5%, Taiwan down 0.86%, Hang Seng down 0.67%, Kospi down 0.55% and Straits Times down 0.11%.

Commodities

CRB Index was up 0.6%; gained for its sixth straight

Crude Oil gained 2.5% at USD 104.6/bbl, new 2-year high; gained 6.7% for week

Natural gas went up 0.7% at USD 3.81/ounce on Friday; was up 5% for week

Gold ended up 1% at USD 1431/ounce, climbed to new record high

Silver prices set new 30-year high. It was up 2.6% at USD 35.41 per ounce

Cotton futures climbed to a new record high; limit up to almost USD 2.13 per pound