Markets extended deep plunge posted in the past two sessions in opening trades following rout in equities across the world. The markets recovered marginally, the Nifty was trading at 5016, down 101 points and the Sensex was at 16,656, down 335 points.
The Nifty touched a low of 4,946 and the Sensex plunged to 16,432 in the opening trades. The Nifty was last seen below the 5000-level in June 2010.
Investors continued to flee out of equities on fear that Europe and United States may not be able to stick to their budgets and quell the spread of a double dip recession. Also, Standard & Poor's cut Freddie Mac and Fannie Mae's long-term ratings by one notch on Monday citing its direct reliance on US government.
Asian markets plunged on Tuesday morning session following sell-off in the US equity markets with banking shares taking a bigger hit. Hong Kong’s Hang Seng Index tumbled 6%, at 19,223 after falling almost 7.2% in the early morning. China’s Shanghai Composite slipped 1.1%, Japan’s Nikkei Stock Average plummeted 4.3% and South Korea's Kospi Composite slipped 9%. The Kosdaq market in South Korea was temporarily halted for 20 minutes following steep cuts in the local stock market according to news reports.
Standard & Poor's in a note to clients said, “The US rating change, together with the weakening sovereign creditworthiness in Europe, does point to dampened market sentiment, potentially raising funding costs in offshore markets, and reversal of capital flows.” Earlier on Friday, S&P downgraded US credit rating to AA+ from AAA which sent red ripples across the world equity markets.
Back in India, analysts expect the markets to continue to remain volatile. Going forward the Federal Open Market Committee meeting will be closely watched for any signs of quantitative easing three. In India the industrial production data for June will be released this week which will give an indication of the economic health.
Among the sectoral indices, BSE IT index continued to be hammered by the investors as they feared that the sector would get worst hit if the west was to slip back into a recession. Wipro fell over 5%, TCS lost 4.9% and HCL Technologies was off 3.1%.
BSE Metal index was also the top loser for the third straight session. NALCO was down almost 6%, Tata Steel lost 4.5% and Hindalco Industries gave up 3.8%.
Top losers on the Sensex were Tata Motors, down 5%, Sun Pharma slipped 4% and DLF plummeted 3.4%. ONGC was the only component trading in the green, up 0.2%.
Among the broader markets, the midcap and the smallcap indices were down over 2% each. Markets breadth was extremely negative, 1,671 stocks declined for 204 stocks which advanced.