Markets test lowest levels in more than two months

A sharp fall in the overnight US markets and fresh concerns related to the European credit crisis played havoc on Friday, as both the Indian benchmark indices fell to their lowest levels in more than two months. The Indian indices lost nearly 5 per cent in the last five trading sessions, making the week one of the worst in more than six months.

The 30-share Sensex of the Bombay Stock Exchange (BSE) lost more than 300 points during the day, as uncertainty related to the ongoing legal battle between Mukesh Ambani and his younger brother Anil added to the dampened investor sentiment. As the Supreme Court ruled in favour of Mukesh Ambani-controlled Reliance Industries, the benchmark indices managed to recover some of the losses.

The Sensex ended the day at 16,769.11, down 218.42 points or 1.29 per cent. RIL, which commands the highest weightage in the Sensex, provided the much-needed support, gaining 2.27 per cent to close at 1,033.85.

Meanwhile, the broader 50-share Nifty of the National Stock Exchange (NSE) settled the day at 5,018.05, down 72.80 points or 1.43 per cent.

“Markets have been jittery on the fears of looming sovereign debt crisis and peripheral European economies getting impacted,” said Navneet Munot, CIO, SBI Mutual Fund. “The possible fallout of the crisis could be outflow of money from risky assets, but we have not seen that in India so far. While the economic data emerging out of the US is strong, longer term concerns on sovereign balance sheets in the developed world being stressed are still there,” added Munot. He said the markets would continue to be driven by global news flow and remain volatile in the short term.

Back in the US, Dow Jones gave market experts the scare of their life by going into free-fall on Thursday afternoon. In a matter of seconds, the Dow plunged 998.50 points, its biggest ever intra-day drop, with some shares falling to near-zero levels. While Nasdaq and NYSE later said they would cancel some of the trades executed between 2.40 pm and 3 pm, the fall was enough to instill fresh fears related to credit downgrades.

The scene was no different in the other markets of the world. Most of the European indices were trading deep in the red over fears that the Greek crisis could soon spread to other economies like Portugal and Spain. The benchmark indices of France, Belgium, the Netherlands, Austria, Norway and Sweden lost in the range of 1-2 per cent each. The UK’s FTSE also closed 1.5 per cent down.

“European factors will continue to weigh on the markets,” said Pramod Gubbi, director (equity sales), Execution Noble. “Markets will remain volatile with a downward direction unless there is a clear solution to the Greece problem. Consumer and economic data from the US have been positive, but there are issues on regulatory reforms as to much they are going to be tightened, coupled with the clarity on Goldman Sachs,” added Gubbi.

Investor fears were further heightened by agency reports that suggested that European Central Bank President Jean-Claude Trichet had signaled no immediate steps to stem the panic.

Meanwhile, leaders of the eurozone are meeting in Brussels to endorse the Greek bailout. The finance chiefs of the G-7 nations have already made an emergency conference call.

Back in India, shares of companies owned by the Ambani brothers were in focus. RNRL, which was marginally in the green before the Supreme Court started pronouncing the order, slipped heavily in the red after the verdict. The shares lost nearly 23 per cent to close at Rs 52.75. Reliance Capital lost 3.66 per cent to close at Rs 683.85.

Other index heavyweights, including Bharti Airtel, Tata Steel, SBI, Reliance Infra, ICICI Bank, HDFC Bank, BHELand ACC ended the day in the red. According to provisional figures, foreign institutional investors (FIIs) were net buyers at Rs 1,308.39 crore, while domestic institutions bought equity worth Rs 654.35 crore.