Black Friday for markets

Sensex slumps 219 points on grim Infosys forecast, global jitters.

Weak global markets and a statement by technology major Infosys Technologies that its financial results in the next quarter would be flat spooked the stock market today, leading to its biggest crash in 2005. Today's crash wiped out Rs 50,000 crore in investor wealth.

The Sensex has crashed by over 100 points five times this year, today's being the fifth time, but this is the first time in 2005 that the Sensex has tumbled by over 200 points.

The benchmark Bombay Stock Exchange Sensex crashed 3.39 per cent or 219 points to close at 6,248.34, its lowest since January 27, 2005. The Nifty ended at 1,956.30, down 3.41 per cent or 69.15 points, well below its crucial 2,000 level.

Shaken by the disappointing financial results announced by IBM and Samsung Electronics, global indices, too, tumbled. The S&P 500 was down 1 per cent, the Nasdaq composite was down 1.40 per cent, the Dow Jones index (down 1.2 per cent), the Shanghai composite index (1.11 per cent) and the Seoul composite index (2.79 per cent).

Andrew Holland, research head at Merrill Lynch, said the markets in India were more concerned at what was happening globally than anything specific to India.

"At the moment, foreign institutional investors are really not doing anything, because the outflows from the emerging markets have not been high. They are waiting for the situation to clarify itself, especially with regard to oil prices. Right now there is so much speculation either way. Concerns over liquidity also exist. The FIIs remain bullish about the Indian market but they are uncertain what to do right now," he explained.

Amitabh Chakraborty, head of research, PGC, Kotak Securities said, "The unwinding of leveraged positions in the futures and options segment, apprehensions about the global commodity cycle and Infosys' flat first quarter guidance dampened sentiment, resulting in a huge crash in today's trading. Selling pressure was witnessed across the board."

A broker said that the mood in the market was extremely cautious as corporate results are not expected to meet Dalal Street's expectations. "Q4 results will be mixed, with the action limited to stock specifics," said the head of research at a domestic broking firm.

The Sensex hit an intra day low of 6232.37 with 1,833 declines and 719 advances. The volumes were lower at Rs 1,807 crore versus Rs 1,828.84 crore on Wednesday on the BSE. The Infosys scrip's price crashed over 6 per cent intra day, triggering a fall in the prices of other technology stocks.

The BSE IT index was the biggest loser, ending 6.31 per cent lower at 2430.93. Infosys finally ended 4.56 per cent lower at Rs 1,956.60. The Wipro stock's price was down 6 per cent to Rs 605.35, the Satyam Computer stock's price ended 4.31 per cent lower at Rs 382.75 and the Tata Consultancy scrip's price ended 5.99 per cent lower to close at Rs 1,316.60.

Of the heavyweights, the ONGC scrip's price was down 3.30 per cent to Rs 846.65, the Reliance Industries share was down 2.81 per cent to Rs 529.70, the ITC scrip was down 2.35 per cent to Rs 1,376.80, while Hindustan Lever ended 0.64 per cent lower at Rs 132.25. The other big losers in the Sensex basket were Hindalco (down 5.43 per cent to Rs 1,257), HDFC Bank (down 4.53 per cent to Rs 536.75) and Tata Steel (down 3.85 per cent to close at Rs 366.25).

Commodity stock prices too ended lower on apprehensions of a slowdown in global commodity prices. The BSE Metal index was down 4.67 per cent or 291 points at 5947.98. The Essar Steel share was down 7.65 per cent to Rs 54.30, the Steel Authority of India scrip was down 6.63 per cent to Rs 58.40, the Jindal Steel share's price was down 3.03 per cent to Rs 1,020 and the Bhushan Steel scrip was down 3.04 per cent to Rs 212.

Patent case loss spooks Dr Reddy's

Shares of Indian generic drug makers fell on Friday after Dr. Reddy's Labs lost a bid to make a copy of Eli Lilly's schizophrenia drug Zyprexa and raised concerns over the challenges ahead.

On Thursday, a US District Court upheld the validity of Lilly's patent on the drug, which was challenged by a trio of generic makers, including Dr. Reddy's. Dr. Reddy's shares closed 3.4 per cent down at Rs 711.80.

Ranbaxy Laboratories dropped 3.43 per cent to Rs 952. The firm, whose generic strategy for the US and European markets also includes patent challenges, is awaiting a verdict on Pfizer's drug Lipitor in the US.

Cipla Ltd, which develops drugs and supplies ingredients to other generics companies, sank 6 per cent.

The patent case loss was a blow to Dr.Reddy's, which had been looking to bump up profits after several dismal quarters. The company said it will appeal the ruling.

"Our strategy remains unchanged and we continue to make consistent progress towards building a sustainable generics business in the U.S.," G.V.Prasad, the firm's chief executive officer, said.