Sensex plunges 704 points on warning of US economic risk.
The devil lies in the detail. The actual meaning of the proverb dawned on global markets today as they went into a tailspin even after the US Federal Reserve announced a $400 billion ‘Operation Twist’ to stimulate the US economy.
Markets the world over ignored the stimulus package, focusing more on the Fed warning of a “significant” downside risk to the US economy. Reports from HSBC showing contraction in the Chinese and euro zone manufacturing sectors also led to the general nervousness.
| MAJOR GLOBAL INDICES | ||
| INDEX | % chg* | |
| AMERICAS (2330 HRS IST) | ||
| S&P 500 | 1,124.15 | -3.65 |
| Dow Jones | 10,681.80 | -3.98 |
| Nasdaq Composite | 2,450.30 | -3.46 |
| EUROPE (2330 HRS IST) | ||
| FTSE 100 | 5,041.61 | -4.67 |
| DAX | 5,164.21 | -4.96 |
| ASIA | ||
| Jakarta Composite | 3,369.14 | -8.88 |
| Hang Seng | 17,911.95 | -4.85 |
| BSE Sensex | 16,361.15 | -4.13 |
| NSE S&P CNX Nifty | 4,923.65 | -4.08 |
| Shanghai Se Composite | 2,443.06 | -2.78 |
| FTSE Straits Times | 2,720.53 | -2.55 |
| Nikkei 225 | 8,560.26 | -2.07 |
| * Over previous close Source: Bloomberg Compiled by BS Research Bureau | ||
All the major equity indices of the world went into free-fall mode, with many registering their highest single-day falls in more than a year.Moreover, indications from global markets point towards a further downside even as authorities are frantically trying to douse fears of a possible recession in the US and default crisis in the euro zone. The emerging markets stock index was down nearly five per cent.
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The 30-share Sensex of the Bombay Stock Exchange lost more than four per cent, or 704 points, to close at 16,361.15. The broader Nifty of the National Stock Exchange ended the day at 4,923.65, down 4.08 per cent or 209.60 points. This is the highest single-day fall in absolute terms for both indices since July 2009. Provisional figures showed foreign institutional investors sold shares worth Rs 1,306 crore on Thursday.
The sell-off picked up pace after European stocks tumbled nearly four per cent, with export-driven software services exporters such as Infosys , energy major Reliance Industries and banks among the big losers.
Elsewhere in Asia, Hang Seng was down more than 900 points (nearly five per cent), while Jakarta Composite lost 8.88 per cent or 328 points. In Europe, almost all leading indices were trading down more than four per cent.
The FTSE lost nearly five per cent or 262 points. Stock futures in US markets too fell sharply.
The Dow Jones Industrial Average futures were down three per cent or 338 points. The S&P futures index was down 2.66 per cent or 31 points.
“The US Federal Reserve has delivered a modern day Operation Twist pretty much as expected, but in pointing out that there are now ‘significant downside risks’ to the economic outlook it is clearly not enough,” said Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors. “As a consequence, and with European debt problems far from resolved, share markets are falling sharply again. Quantitative easing (or QE3) from the Fed is inevitable and will help shares but is unlikely to be delivered until after the Fed’s early November meeting, leaving share markets vulnerable in the interim,” he explained. “Heavy short positions were built today,” said Saurabh Mukherjea, who heads the institutional equities business at Mumbai-based Ambit Capital. He sees the Sensex grinding towards 14,500 by the year-end due to global concerns and India’s economic challenges.
The massive downswing in the Indian market also led to a lot of stop losses being triggered, said analysts. Also, a large amount of basket selling on account of the massive fall in benchmark indices could not be ruled out, they added.
“Stop losses were triggered after Nifty breached the 4,980 level, which led to the unwinding of a lot of long positions. There was also fresh shorting in large-cap stocks from institutions,” said Siddharth Bhamre, head of equity derivatives, Angel Broking. “However, we don’t expect a significant downside below 4,800,” he added.
Reliance Industries, which commands the highest weightage in the benchmark indices, lost 6.85 per cent in its biggest one-day fall since June 2009, after reports the oil ministry may lower the company’s cost recovery at its key gas blocks off India's east coast. It closed at Rs 780.25. Other index heavyweights like Infosys, TCS, SBI and ICICI Bank all lost in the range of three-five per cent. DLF and Jaiprakash Associates lost in the range of seven-nine per cent.