Sensex feels Asian shock

INDEX slumps 143 points; Rs 37,000 crore in investor wealth lost

Equity markets across Asia and Europe slipped on Tuesday to multi-month lows as confidence in the growth of the world's largest economies evaporated.

The benchmark Bombay Stock Exchange Sensex lost 2.19 per cent (142.88 points) in choppy trading on Tuesday to close at a two-month low and 7.9 per cent (548 points) off the all-time high of 6,915.09 on March 9.

In fact, the Sensex was the biggest loser among Asian indices, followed by South Korea's Kospi, which lost 1.92 per cent, and Japan's Nikkei 225 Stock Average, which lost 1.63 per cent.

The Sensex has lost 4.26 per cent since the beginning of the current calendar year. Vikram Kotak, president, Techno Shares and Stocks, said, "Lack of fresh buying and weakness in other Asian markets dampened sentiment on Tuesday. Also, leveraged positions got squared off, adding to the free fall in the market. The sentiment is extremely cautious and markets are now looking forward to Thursday's expiry in the futures and options segment for any further direction."

With Tuesday's losses, investors have lost Rs 150,000 crore from March 9. "India has underperformed among its Asian peers in the first quarter of 2005 and with money moving out of emerging markets, the Indian market is bound to feel the heat. Select hedge funds are facing redemption pressure overseas and have been booking profit across Asian markets, including India," said a equity dealer with a foreign broking firm.

Investors saw Rs 37,000 crore of their wealth go up in smoke in Tuesday's trading as all round selling pressure knocked out current share favourites in the metals, oil and gas, bank and automobile industries.

In the broad market, losers beat gainers six to one. However, some buying interest was seen in pharmaceuticals and software stocks, which could gain from a weaker rupee, and in stocks of fast moving consumer goods companies.

Equity dealers said separate reports by Japan's Statistics Bureau showed that consumer spending in February had dropped more than expected, that retail sales had fallen and unemployment had risen.

In South Korea, a government report showed factory production in February had dipped to its lowest level in seven years.

Global markets read these number to mean that growth in the largest economies in the region might be faltering. Complicating matters, the US Fed has threatened a more aggressive pace of rate hikes.

The bad news triggered a sell-off that pushed all Asian indices down, with the exception of the Karachi Stock Exchange's KSE-100, which gained 1.88 per cent (145 points).

Data out on Wednesday are expected to show that consumer confidence slipped for a second straight month in March in the US too, raising further concerns about the pace of expansion in the world's biggest economy.

Atul Suri, CEO Marathon Trends, a firm that offers technical analysis advisory services said, "Technically the market looks weak after it broke the major trend line last week. There could be a short term pull back as the market looks oversold, but the underline trend looks weak from current levels."

A global wave of despondency hit European shores after France reported a decline in business confidence in March to the lowest level in 15 months. Benchmark indices declined in 13 of 18 European markets.

Germany's DAX Index and France's CAC 40 Index both fell 0.7 per cent and the UK's FTSE 100 Index dropped 0.5 per cent. Only two stocks in the 30-scrip Sensex basket ended the day with gains. These were HDFC Bank, with gains of 0.36 per cent, and Bajaj Auto with 0.17 per cent gains. All other closed with losses.

The Dr Reddy's Laboratories stock, which had inched up on Monday on news on the deal with ICICI Ventures, was the biggest loser on Tuesday: the stock lost 4.24 per cent to Rs 739.55. The Tisco counter, which was abuzz with expectations of the company announcing a price hike effective April 1, lost 4.05 per cent to Rs 401.40. The Hero Honda scrip lost 4.05 per cent to Rs 519.50 and the State Bank of India scrip lost 3.77 per cent to close at Rs 640.90.

Oil and gas stocks came under renewed selling pressure on reports that the government may not agree to a hike in retail prices for petrol and diesel from April 1. As a result, the HPCL scrip lost 3.43 per cent to Rs 300.10, the BPCL scrip lost 3 per cent to Rs 353.50, the Indian Oil scrip lost 0.86 per cent to Rs 427.90 and the Reliance Industries scrip lost 3.19 per cent to Rs 548.95.