Sensex faces UK sub-prime heat

Index falls 221 points from the day's high.

The re-emergence of the sub-prime crisis "" this time from the UK "" spooked the domestic markets, as the benchmark Sensex on Friday fell by 220.84 points from the day's high on profit booking in key stocks.

 As a result, a new high for the stock markets that looked within reach in the morning, proved to be elusive.

Tracking the rally in the US markets' overnight and strong buying, the Sensex went up to 15,824.64 points, just 40-odd points away from the life-high level, before news that British mortgage lender Northern Rock got emergency funding from the Bank of England, the biggest bailout of a British lender in 30 years, forced domestic investors into a selling spree in the latter half of the trading session here.

The Sensex ended at 15,603.80 points, down 10.64 points, or 0.07 per cent, from yesterday. The broad-based Nifty-50 closed at 4,518 points, down 10.95 points, or 0.24 per cent.

The market breadth was negative "" out of 2,761 stocks traded, 1,744 declined, 964 advanced and 53 were unchanged on Friday.

Key European indices FTSE 100 and CAC opened nearly 2 per cent lower on the news that Northern Rock became the biggest British casualty of the credit squeeze sparked by the crisis in the US sub-prime mortgage market.

In India, the growth in inflation based on the wholesale price index dropped to 3.5 per cent for the week ended September 1 as against 3.79 per cent in the earlier week, still slightly higher than market estimates.

Though the market is 265 points short of its all-time high, analysts expect profit booking at these levels. "Global cues will set the tone next week. The outcome of the Fed Reserve meeting on September 18 will be keenly tracked," said an analyst with a foreign brokerage firm.

"Some sectors like oil and gas and CNX Mid Cap have reached new highs. Since both the Sensex and Nifty are close to an all-time high, some profit booking can be expected next week. The immediate reaction would be a downward movement by 100-150 points for the Nifty and 550-600 points for the Sensex though it is not entirely a bearish phase but a kind of re-alignment," said Vasant Joshi, technical analyst, Religare Securities.

Riding on the inclusion of Unitech in the Nifty-50, the BSE Realty Index (up by 1.59 per cent to 7,972.75 points) was the best performing index on Friday. Ansal Infrastructure (up to Rs 261.35 a share or 5.17 per cent) was the top gainer. The Bankex, which tracks the movement of bank stocks, closed at 8,136.11 points, up 0.67 per cent.

ICICI Bank (up to Rs 907.15 a share or 2.64 per cent), HDFC Bank (up 1.33 per cent) and Larsen and Toubro (up 0.9 per cent) were the top gainers.

Top losers include NTPC (down to Rs 185.65 a share or 3.26 per cent), Maruti Udyog (down 2.95 per cent) and ACC (down 1.94 per cent).

"Mutual funds have increased their holdings in banking and financial services sector. Insurance companies were sellers at cement counters on Friday.

Since cement stocks have risen suddenly, these institutions were booking profits in these counters," said Anita Gandhi, institutional head, Arihant Capital.

Advance tax figures will trickle in after the September 15 and the trend seems good, which will guide the markets.If the Nifty trades around 4548-50 levels for some trading sessions, then that will be a sign of market recovery, added Gandhi.