The Indian capital markets witnessed a bloodbath yesterday, with major stock market indices crashing by nearly five per cent, in the wake of a slide for all major South-East Asian stock markets and uncertainties of a looming payment crisis at the local markets.
The slide turned sharper as the Unit Trust of India, a saviour at the markets over the previous two weeks, was virtually absent from the markets through the entire trading session.
The BSE 30 share index nosedived 194.45 points (-5.80 per cent) to close at 3152.96 against a previous close of 3347.41, registering its lowest level in the past one and a half years. The NSE index closed 54.35 points lower at 916.80 against a previous close of 971.15.
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Early morning trading witnessed bearish trends with a section of the market making an early exit with fears of heavy redemption pressures from some foreign funds. The S E Asian markets were particularly nervous with the weakening of the yen, and fears of another Asian flu dampened the local and FII sentiment. Further, by the morning trading session it was clear that the long positions of certain key speculators at the markets had not been wound up fully and the fears of a payment problem loomed large at the BSE.
Marketmen are of the view that the sensex may slide a further 50-75 points today as trading sentiments remain weak. The slide may however not be sharp as the UTI is expected to support the markets at this level today. Top level UTI sources said there was little cause for panic and there were several attractive valuations at the markets.
The Indian GDR markets in London mirrored the sentiment, with key GDRs down by 8-10 per cent by late evening.
The Skindia GDR index was also down 9.8 per cent to an all time low of 574.26. According to latest data from the NSE, FIIs were net sellers at the markets yesterday for an amount of Rs 20.32 crore, with gross purchases of Rs 5.22 crore and gross sales of Rs 25.54 crore.
``With the yen depreciating, the potential risk to Asian economy multiplies...with the fear that another Asian crisis could come about. In turn some of the Asian foreign funds which faced redemptions have sold at the markets. This is not a panic situation and the Indian markets are not as vulnerable as some Asian economies...the exchange rate risk is limited..short-term borrowings and BoP situations are worse elsewhere. If anything one should see a correction at the markets in the other direction,'' Ajay Sondhi, CEO, UBS Ag and Warburg Dillion Read said.
"Though there was some selling from foreign funds, the entire selling cannot be attributed to selling from overseas. The measures taken by RBI, the BSE and the Sebi in the recent days did not had any significant impact on the markets.
Also there is a clear nervousness in the market over of the payment crisis which is looming large over the BSE," said a source at a leading Hong Kong-based FII.
According to Devesh Kumar, head of research, ABN Amro, the slide has been due to the speculative positions not winding up fully. ``There is the factor of political weakning, as there was pressure witnessed on the government during the recent parliamentary session. G-8 observations and the sanctions have only weakened sentiment further. A further slide of 50-100 points in the coming trading cannot be ruled out,'' he said.