Local financial markets took a beating on Tuesday, which saw the equity and currency markets come under pressure, while bond dealers opted not to trade.
Markets reacted sharply to the new government led by President Chandrika Kumaratunga, largely due to uncertainties surrounding its economic and reform agenda.
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rnKumaratungas United Peoples Freedom Alliance (UPFA) secured 105 seats of the 225-seat Parliament, and swore in former Leader of the Opposition, Mahinda Rajapakse as the new Prime Minister on Tuesday.rn
rnIn clear thumbs down, the Colombo bourse plunged largely on panic selling with most bluechip counters losing ground in the process.rn
rnThe benchmark All Share Price Index fell 124.47 points to 1,188.99, while the liquid Milanka Price Index dropped 262.93 points to close at 1,814.00.rn
rnTuesdays turnover rested at Rs. 215.4 mn, and brokers expect selling pressure to continue as the week unfolds.
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rnMarket heavyweights, Sri Lanka Telecom and John Keells Holdings were among the losers in Tuesdays mayhem.rn
rnSLT lost Rs. 2.50 to Rs. 16.50 on 1.3 mn trades, while JKH fell Rs.
15.75 to Rs. 97.00 on volumes of 301,600.rn
rnElsewhere conglomerate Hayleys shed Rs. 15.75 to Rs. 102.25 on 12,514 trades, the family controlled Hemas Holdings dropped Rs.
9.50 to Rs. 81.00 on 65,700 trades and Aitken Spence fell Rs. 35.50 to Rs. 230.50 on volumes of 17,100.rn
rnThe currency markets also came under pressure, with the rupee closing at 98.40 to the US dollar. ldblquote There was a single trade at Rs. 98.40 for a small volume,
dblquote said Dudeepa Ratwatte, Chief Dealer at Hatton National Bank.
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rnOverall, the greenback saw some wide quotes between Rs. 97.85 and Rs. 98.50 during trading.rn
rn"We didnt see any major players in the market today. They are just waiting on the sidelines till a clear direction comes,
dblquote he said.
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rnMarket players expect the rupee to hover around Rs. 98.80-90 levels this week, unless state banks intervene to shore up the currency to ease post-poll jitters.
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rnMoney and bond market players also opted to play its safe citing lack clarity in UPFAs policies with regard to interest rates.rn
rnCentral Bank officials maintained that there was no change in the government domestic borrowing programme. In the run up to polls, the UPFA said it would subsidies key sectors like agriculture and industry to help local entrepreneurs.
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rnBut there was no clear direction as to how they would raise revenue, control budget deficits, or maintain the present low interest rate environment.rn
rnSecondary market bond yields were stuck at Fridays 8.60 percent levels, though traders feel six-year bond yields may climb up around 40 points or so, when trading eventually gets under way.rn
rnCall money rates closed up at 8.0 percent, from Fridays close of 7.
5 percent.rnrn