The BSE Sensex fell 285 points or 1.5 per cent to 19,008 on Tuesday after the DMK pulled out of the ruling UPA coalition. The Nifty declined 89 points to 5,746, while the rupee traded lower at 54.41 against the dollar.
The Sensex closed off the day's low, having fallen over 350 points to below 19,000 after the DMK announced its decision. This was the third straight day of losses for Indian equities.
The DMK, which has 18 seats in the Lok Sabha, not only pulled out of the UPA alliance, but also ruled out outside support. However, the continuation of the government is not under threat, with the SP (with 22 seats) supporting it from the outside.
Finance Minister P Chidambaram said the government is stable, the government will continue, and the government has a majority in the House.
But global investment bank CLSA said survival of the government will matter more than tough economic decisions that are still needed and overdue.
The political uncertainty came on the day Reserve Bank of India cut interest rates but disappointed investors with a statement seen as cautious on monetary policy.
Market analysts said traders were over reacting.
"This is a knee jerk reaction. Markets have been nervous over the last few weeks. They have already been factoring in a lot of negatives. This news is highlighting the risk of early elections, but don't see too much downsides. Investors don't need to panic, they should buy on dips," Rakesh Arora of Macquarie said.
All groups of stocks closed with deep cuts, but high beta realty and metal stocks fell sharply.
43 shares closed lower on the Nifty. Bharti Airtel plunged 5 per cent after the 2G court summoned Bharti's chairman Sunil Mittal over alleged irregularities in the allocation of additional spectrum in the NDA government.
State Bank of India, ICICI Bank and Reliance Industries - the big Sensex movers - closed lower. However, tobacco major ITC ended 0.7 per cent higher, while Infosys closed flat, supporting markets.
The BSE Sensex fell 285 points or 1.5 per cent to 19,008 on Tuesday after the DMK pulled out of the ruling UPA coalition. The Nifty declined 89 points to 5,746, while the rupee traded lower at 54.41 against the dollar.
The Sensex closed off the day's low, having fallen over 350 points to below 19,000 after the DMK announced its decision. This was the third straight day of losses for Indian equities.
The DMK, which has 18 seats in the Lok Sabha, not only pulled out of the UPA alliance, but also ruled out outside support. However, the continuation of the government is not under threat, with the SP (with 22 seats) supporting it from the outside.
Finance Minister P Chidambaram said the government is stable, the government will continue, and the government has a majority in the House.
But global investment bank CLSA said survival of the government will matter more than tough economic decisions that are still needed and overdue.
The political uncertainty came on the day Reserve Bank of India cut interest rates but disappointed investors with a statement seen as cautious on monetary policy.
Market analysts said traders were over reacting.
"This is a knee jerk reaction. Markets have been nervous over the last few weeks. They have already been factoring in a lot of negatives. This news is highlighting the risk of early elections, but don't see too much downsides. Investors don't need to panic, they should buy on dips," Rakesh Arora of Macquarie said.
All groups of stocks closed with deep cuts, but high beta realty and metal stocks fell sharply.
43 shares closed lower on the Nifty. Bharti Airtel plunged 5 per cent after the 2G court summoned Bharti's chairman Sunil Mittal over alleged irregularities in the allocation of additional spectrum in the NDA government.
State Bank of India, ICICI Bank and Reliance Industries - the big Sensex movers - closed lower. However, tobacco major ITC ended 0.7 per cent higher, while Infosys closed flat, supporting markets.
The BSE Sensex fell 285 points or 1.5 per cent to 19,008 on Tuesday after the DMK pulled out of the ruling UPA coalition. The Nifty declined 89 points to 5,746, while the rupee traded lower at 54.41 against the dollar.
The Sensex closed off the day's low, having fallen over 350 points to below 19,000 after the DMK announced its decision. This was the third straight day of losses for Indian equities.
The DMK, which has 18 seats in the Lok Sabha, not only pulled out of the UPA alliance, but also ruled out outside support. However, the continuation of the government is not under threat, with the SP (with 22 seats) supporting it from the outside.
Finance Minister P Chidambaram said the government is stable, the government will continue, and the government has a majority in the House.
But global investment bank CLSA said survival of the government will matter more than tough economic decisions that are still needed and overdue.
The political uncertainty came on the day Reserve Bank of India cut interest rates but disappointed investors with a statement seen as cautious on monetary policy.
Market analysts said traders were over reacting.
"This is a knee jerk reaction. Markets have been nervous over the last few weeks. They have already been factoring in a lot of negatives. This news is highlighting the risk of early elections, but don't see too much downsides. Investors don't need to panic, they should buy on dips," Rakesh Arora of Macquarie said.
All groups of stocks closed with deep cuts, but high beta realty and metal stocks fell sharply.
43 shares closed lower on the Nifty. Bharti Airtel plunged 5 per cent after the 2G court summoned Bharti's chairman Sunil Mittal over alleged irregularities in the allocation of additional spectrum in the NDA government.
State Bank of India, ICICI Bank and Reliance Industries - the big Sensex movers - closed lower. However, tobacco major ITC ended 0.7 per cent higher, while Infosys closed flat, supporting markets.
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