Sensex ends 240 points lower on European woes

The benchmark Nifty retreated all its Monday's gains on negative global cues and closed 77 points lower. The sell-off across all sectors as well as funding worries for banks in Europe dragged the Sensex 240 points down. Metal, banking, oil & gas, power and realty were major losers; respective indices declined 1-2.7%.

European markets were trading 2-2.6% lower, as investors were nervous over the funding situation of banks about to repay 442 billion euros (USD 545.5 billion) to the European Central Bank. Banks must repay the money borrowed a year ago at rock bottom rates on Thursday, leaving a potential liquidity shortfall in the financial system of over 100 billion euros. The Dow Jones and Nasdaq futures also slipped 1.2-1.5%.

Euro fell 0.4% to USD 1.2224 while it fell to record lows of 1.3250 against the safe-haven Swiss francs. The euro lost 1.3% to 108.25 yen. Commodities also declined; LME copper was down 2.8% and aluminium down 1%. MCX Copper fell 2.5%. Crude oil futures went down 1.5% to USD 76.76 a barrel.

China's Shanghai fell 4.27% to a 14-month low as investors started pulling funds from the market to prepare for a major initial public offering by Agricultural Bank of China, pointing to tight liquidity in China's markets. The company aims to raise USD 23 billion. Among other Asian markets, Hang Seng declined 2.5%; Nikkei, Jakarta, Straits Times, Kospi and Taiwan were down 1-2%.

The 30-share BSE Sensex closed at 17,534.09, down 240.17 points or 1.35% and the 50-share NSE Nifty shed 77.35 points or 1.45% to settle at 5,256.15.

The global macro signals are disturbing but the domestic news is quite positive, said Raamdeo Agrawal, Director and Co-Founder of Motilal Oswal Financial Services. He doesn't see Sensex going below 16,500.