The Hindu Business Line : Sensex down 600 pts on global worries

Wednesday woes
Sensex records third steepest fall in history
Rise in crude oil prices raises concerns
Foreign funds turn net sellers in markets

Our Bureau

Mumbai, Aug 1 The spectre of defaults in sub-prime lending in the US housing loan market, which spooked markets worldwide, didn’t spare the country’s bourses either.

The benchmark Sensex and Nifty indices shed around four per cent of their previous day’s close on a day of severe bloodletting across the spectrum.

The Sensex shed 615.22 points or 3.96 per cent to close below 15,000 .

“The Indian markets collapsed today mainly due to sub-prime market meltdown after a US mortgage lender said that it had no cash to pay its creditors, and one of leading US hedge fund houses warned that their funds may post losses amid growing trouble in the US sub-prime mortgage market,” said Mr Seshadri Bharathan, Director (Stock Broking), Dawnaday AV Securities Ltd.

The Sensex recorded its third steepest fall in history in absolute points, after major sell-off across sectors.

The broader index NSE S&P CNX Nifty dipped 4.04 per cent to end the day at 4,345.85.

The Dow Industrial Average Index fell 1.10 per cent to close at 13,211.99 yesterday.

The rise in crude oil prices, with oil tipping over $78 a barrel yesterday, has also raised concerns, according to dealers.

Foreign funds were net sellers to the tune of Rs 1,255.54 crore in the Indian markets, as per provisional data from the NSE.

With the yen trading at a three-month high, concerns over yen carry trade and outflow of money from emerging markets to meet with the rising yen have surfaced.

“There is likely unwinding of yen carry positions,” said the research head of a broking firm.

Asian markets also saw a sell-off after Australian bank Macquarie said that retail investors faced huge losses in two of its high-yielding bond funds.

“Macquarie Bank has posted huge losses in the US market, which has led to a panic among foreign investors across the globe,” said Mr Shailendra Jindal, CEO of Mehta Financial Services Ltd.

Interestingly, domestic institutions turned net buyers to the tune of Rs 935.44 crore, as per the figure from the NSE.

Interest rate-sensitive sectors such as real estate, auto, metal and banking were the worst hit.

The BSE realty index lost 6.64 per cent to close at 7,854.05 points, while the BSE metal, banking and auto index lost over three per cent.

The RBI had increased the cash-reserve ratio for banks by 50 basis points in its monetary policy yesterday in an attempt to tighten liquidity.

None of the 30 stocks in the Sensex gained. Losers beat gainers 4:1.

The major loser in Sensex was ACC at Rs 965.90, down 8.57 per cent, followed by Reliance Energy at Rs 737.30, down 7.08 per cent.

Despite the huge dip, market players continued to back the fundamentals and the growth story of the Indian economy.

Dealers said that the markets had corrected after witnessing straight gains, adding that profit booking at levels above 15,000 for the Sensex was anticipated.

“We had been cautious on the markets as we believe, that at 15,700-15,800 levels, valuations were at levels higher than what existed at the time of the corrections witnessed in May 2006 and February 2007,” said Mr S.A. Narayan, Managing Director, Kotak Securities.

The next direction of our markets would be along the lines of the global markets, as the link between the Indian bourses and the global markets has strengthened considerably, the dealers added.

“The markets need to consolidate before rising any further. There are chances of it falling further tomorrow, but it’s difficult to take a call as we have to keep an eye on world markets,” said Mr Vijay Kedia, Managing Director, Kedia Securities.

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