Stock markets fell sharply with the Bombay Stock Exchange’s benchmark Sensitive Index, or Sensex, falling to its lowest level since August 2006 on concerns that the credit crisis would topple more banks and impact global growth.
The Sensex tanked a massive 954 points before recovering more than half the losses to end the day weaker by nearly 367 points after heavy buying by domestic institutional investors, statements by finance minister P Chidambaram and a bailout package in the UK cooled market sentiments in the later part of the day.
The broader index Nifty-50 closed at 3,513.65 points, down 93 points or 2.58 per cent.
Major Asian markets fell between 3.04 per cent and 9.38 per cent. Yesterday, the US markets had crashed with Dow Jones closing at 9,447.11 points, down 5.11 per cent.
Taking global cues, the Sensex opened 379 points down at 11,316.24. Within minutes, it fell below the 11,000 psychological level and hit a low of 10,740.76 in intra-day trading.
Other Asian markets were also deteriorating and the Indonesian market was closed for trading.
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The fall across Asia was due to sale by foreign investors and India was no different. On a net basis, foreign institutional investors (FIIs) sold shares worth Rs 1,055.51 crore on the Indian exchanges. FIIs seemed to have ignored the relaxation in the participatory note rules last evening onwards and sold shares to generate whatever funds they could, said a fund manager handling portfolio investors at a local brokerage.
“Continuous uncertainty in the markets has resulted in over-pessimism. Heavy selling by certain hedge funds and FIIs facing redemption pressure has added to market worries,” added Anup Maheshwari, head of equities and corporate strategy at DSP Merrill Lynch Fund Managers.
Domestic investors, however, found the valuations attractive and started buying in the second half of the day. They were net buyers to the extent of Rs 1,083.56 crore, more than offsetting FII sales.
| 2008 VERSUS 2006 | |||||
| PE | FII HOLDINGS (Rs crore) | ||||
| Sensex | Total mkt | Sensex | Total mkt | ||
| Apr-08 | 21.43 | 19.92 | Apr 06 | 305735.72 | 513914.81 |
| Oct-08 | 14.80 | 12.32 | Oct-08 | 296627.47 | 508209.10 |
| MUTUAL FUND ASSET UNDER MANAGEMENT Rs crore | |||||
| 6-Apr | |||||
Oct-08
529102.92
GDP
Mcap/GDP
3580344*
0.87
4713158#
0.81
By then, the UK Treasury had also announced an $87 billion plan to inject money into the banking system to prevent a collapse of the banking system. The move came just before the European markets opened for trading.
A rate cut by the Federal Reserve and the European Commercial Bank (ECB), among others, after the Indian markets closed for trading today may provide short-term relief to the markets, unless further bad news pours in on Dussehra.
“There is a concerted effort by central banks worldwide to soothe the markets and hence markets should stabilise now,” said UTI Asset Management Company Chairman and Managing Director UK Sinha.
Among the index stocks that gained today, Ranbaxy Laboratories (up 9.08 per cent to Rs 279.25 a share), Tata Power (up 4.79 per cent to Rs 804.6 a share) and Mahindra and Mahindra (up 2.75 per cent to Rs 486 a share).
Stocks that lost include Jaiprakash Associates (down 9.91 per cent to Rs 90.95 a share), Wipro (down 7.91 per cent to Rs 282.35 a share) and Sterlite Industries (down 6.85 per cent to Rs 292.55 a share).
The consumer durable index lost the most, shedding 172 points or 6.75 per cent. The market breadth remained poor with 441 stocks on the advancing side and 2165 stocks on the declining side on the BSE.