Indian indices tumble over 2%, Sensex sinks 700 pts intra-day, lowest close since June 2010.
The Bombay Stock Exchange (BSE) benchmark Sensex sank 700 points during the day, but recouped a large part of its losses by the end as traders covered their short positions. The 30-stock index ended down 387.31 points, or 2.19 per cent, at 17,305.87.
At the National Stock Exchange, the 50-stock Nifty index lost 120.55 points, or 2.26 per cent, at 5,211.25. The index had fallen 215 points during the day, but managed to close above an important support level of 5,200. Friday’s market fall wiped off Rs 1,33,126 crore of investors’ wealth. NSE’s volatility index, India VIX, a gauge of traders’ perception of near-term risks in the market based on options prices, jumped 23.15 per cent to 24.90 on Friday.
There may, however, be some hope for investors when the market opens on Monday as the Dow and S&P 500 were trading 0.66 per cent and 0.37 per cent higher, respectively, on Friday (till 2320 hrs IST) after better-than-expected jobs data showed US non-farm payrolls rose 117,000.
“Investors are worried over poor economic data in the US and the euro zone debt crisis spiralling out of control. It’s hard to see those issues going away soon,” said Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors. “Valuations of Indian shares have improved, but they are still rich compared with other Asian countries. If global markets remain rough like this, the Indian market will also suffer in the short term,” he added.
Foreign institutional investors (FIIs) sold Indian shares worth Rs 1,788.96 crore on Friday, provisional data on the BSE website showed. On the other hand, domestic institutional investors bought shares to the tune of Rs 1,372.49 crore.
Risk aversion among foreign investors prompted the rupee to fall to 44.74 against the US dollar on Friday from 44.55 yesterday, according to Bloomberg data. The Indian currency has lost 1.26 per cent in a week against the greenback.
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Base metals price were down 2.5-4.5 per cent on Friday, while Brent crude oil was marginally up from yesterday’s $107.36 to $107.89. Gold was up Rs 145 per 10 gram to Rs 24,170, while silver closed lower by 3.63 per cent to Rs 59,400 at Mumbai’s Zaveri Bazaar.
The recent selling pressure in commodities has washed out all the gain in commodities made during 2011.
Finance Minister Pranab Mukherjee tried to calm jittery investors. “This is mainly because of the fact that some projection has been made about poor recovery of the US. This has affected the market sentiment. Current volatility is temporary. Hope that there will be a recovery shortly,” he said.
| WORLD INDICES | ||
| 5-Aug | % chg** | |
| ASIA PACIFIC | ||
| Taiwan Taiex | 7,853.13 | -5.58 |
| Jakarta Composite | 3,921.64 | -4.86 |
| Hang Seng | 20,946.14 | -4.29 |
| Nikkei 225 | 9,299.88 | -3.72 |
| Kospi | 1,943.75 | -3.70 |
| Nifty | 5,211.25 | -2.26 |
| Sensex | 17,305.87 | -2.19 |
| Shanghai Se Composite | 2,626.42 | -2.15 |
| THE AMERICAS | ||
| Nasdaq Composite | 2,549.13* | -0.32 |
| S&P 500 | 1,205.25* | 0.37 |
| Dow Jones Indus. Avg | 11,457.30* | 0.66 |
| EUROPE/AFRICA/WEST ASIA | ||
| FTSE 100 | 5,305.50* | -2.71 |
| DAX | 6,364.50* | -2.78 |
| CAC 40 | 3,278.56* | -1.26 |
| **Over previous close *Till 2320 hrs IST; Source: Bloomberg Compiled by BS Research Bureau | ||
Economic Affairs Secretary R Gopalan said, "Fundamentals (of the economy) are very strong and our markets will be able to overcome this panic reaction. I am sure the investors will find merit in investing in our markets and the markets will soon recover.”
Sebi chairman UK Sinha also sought to soothe market nerves and said the risk management system of stock exchanges was working perfectly. "Our belief is that everything is perfect and right in our market and there is nothing for people to worry," he told reporters on the sidelines of an event in Hyderabad.
Among the major Nifty losers, Reliance Infrastructure lost 7.39 per cent at Rs 523.90, while Reliance Communications gave up 7.32 per cent at Rs 91.85. Others like Cairn India, Sterlite, HCL Technologies, Sesa Goa and Reliance Power also fell over 5 per cent.
Technical experts are cautious on their market outlook. "There could be a further downside of 100 points in the Nifty, but I do not see a major downside risk in blue-chip companies as the fundamentals are not damaged,” said Deepak Mohoni, director at trendwatchindia.com.
All the sectoral indices on the BSE ended in the red with export-focused IT stocks bearing the maximum brunt. The BSE IT index declined 3.93 per cent. The technology, realty and power indices also lost over 3 per cent each.
“We don’t expect any direct impact of the global crisis for India, except in the form of increased risk averseness impacting FII flows,” said Sukumar Rajah, managing director & CIO, Asian equities, Franklin Templeton Investments. “India’s high forex reserves, low external debt and low export-to-GDP ratio provide cushion to deal with the global crisis, like it did in 2008. The global weakness will pull down commodity prices, helping India on the inflation front,” he added.
Earlier, major Asian markets fell on Friday, following a sharp sell-off in the US market overnight. Taiwan’s Taiex sank 5.58 per cent, Hong Kong’s Hang Seng fell 4.29 per cent and Japan’s Nikkei 225 dropped 3.72 per cent. Key US indices Dow Jones Industrial Average and S&P 500 fell 5.08 per cent and 4.78 per cent, respectively, on Thursday. More than $2.5 trillion have been wiped off the value of world stocks this week, according to a Reuters report.