Markets in global meltdown

Rs 6.6 lakh cr m-cap wiped out; India worst hit.

Panic gripped the Indian market after the benchmark indices fell by their steepest as US recession fears brought down stock prices across the globe, wiping off $4.45 trillion in values.

Continued sales by foreign funds, a squeeze in domestic liquidity, and panic sales by retail investors accentuated the fall.

The Sensex plunged 1,408.35 points, or 7.41 per cent, to 17,605.35 "" the lowest level since October 22 last year.

In a dramatic day's events, the Bombay Stock Exchange (BSE) closed trading twice "" at 2.49 pm and 2.52 pm "" the first time since October 2007 (when curbs on participatory notes created panic) "" after the Sensex dived 10.8 per cent, or over 2,000 points.

An exchange spokesman, however, said the closures had nothing to do with the fall in the Sensex. "It was only a technical snag. It was just a coincidence that the shutdown occurred when the Sensex fell over 10 per cent," the spokesman said.

Under exchange rules, the circuit filter (or maximum allowable fluctuation) is triggered only if the benchmarks fall (or rise) 15 per cent after 2.30 pm, or one hour before the close. Before 2.30 pm, the trigger is 10 per cent.

Meanwhile, the Securities and Exchange Board of India (Sebi) has asked the BSE for an explanation for the shut down.

There was no such stoppage by the National Stock Exchange (NSE), though its officials also asked brokerage houses to pay the margin money so that they could continue trading unobstructed.

With yesterday's fall, the 30-share Sensex has lost 3,601.42 points, or 16.98 per cent, from the intra-day peak of 21,206.77 posted on 10 January "" just seven trading sessions ago. 
 

SENSEX LOSERS
Rs	% Change*
REL
1776.05	-16.38
ACC
727.6	-15.85
Bajaj Auto
2064.35	-15.21
NTPC
205.65	-14.15
RCom
612.9	-12.71
* Change over prev close

All 30 Sensex stocks declined and nearly half the stocks in the market hit the lower circuit. Only 139 stocks advanced and 2,657 stocks ended negative.

Small and mid-cap stocks, which fell by nearly 12 per cent on average, were the worst hit due to the panic sales. 
 

SENSEX 5 LARGEST FALL
Date	Prev  Close	Close	Change	% change
21-Jan-08	19013.70	17605.35	-1408.35	-7.41
18-May-06	12217.81	11391.43	-826.38	-6.76
17-Dec-07	20030.83	19261.35	-769.48	-3.84
18-Oct-07	18715.82	17998.39	-717.43	-3.83
18-Jan-08	19700.82	19013.7	-687.12	-3.49

NSE's 50-share S&P CNX Nifty Index shed 496.5 points, or 8.70 per cent, to 5,208.30, its biggest points fall.

Some stocks that have seen the maximum run-up in recent months like those in real estate (BSE realty was down 12.83 per cent), metals (down 13.30 per cent), power (10.94 per cent) and financial services, accounted for most of the fall.

Major banks like ICICI Bank and HDFC Bank sold on behalf of their brokers. Citibank, UBS and HSBC were major sellers.

Foreign funds sold a net of Rs 3,296.73 crore, taking net sales for January to Rs 13,680 crore.

The Indian market, which alone wiped off Rs 6.66 lakh crore in market capitialisation, was the worst hit in the global meltdown. Since the beginning of last week, the Indian market lost Rs 11.864 lakh crore. The story was more or less similar across the globe. Japan's Nikkei 225 dropped 3.9 per cent to 13,325.94, the lowest since October 25, 2005. Hong Kong's Hang Seng Index lost 5.5 per cent, the biggest fall since the September 11, 2001.

There appears to be no respite in sight as the European markets slipped further. Trading in the US is closed on Monday for Martin Luther King Day.

"The Indian markets have been the best performing market in the last four months. Now, when the tide turns, it is only natural that we have to bear the sharpest fall," said Shankar Sharma of First Global Securities.

"It was the case during the dotcom period of 1999-2001. The shares of IT firms ran up the fastest in India during the latter part of the boom. In the crash, India faced the biggest fall," he added. "Concerns of a slowdown are very much alive in India as it is with the US markets."

"Indian markets are playing a little bit of catch-up with the other global markets. A liquidity squeeze and oversupply of stocks in certain sectors such as real estate, metals and power, where we have seen sharp run-up, brought down prices," said Keshav Sanghi, director and head of equities, Deutsche Equities India.

The domestic market has been fairly resilient in the last four months, despite the impact the sub-prime, or high-risk mortage turmoil, had on other markets worldwide.

"It is a reality check for retail investors. But, for the 12-month period, we still see a 25 per cent upside from here on," he added.

Foreign funds have been net sellers for over Rs 12,000 crore this month, the bulk of it executed since the beginning of last week.

"There is a global liquidity squeeze. Short-term we are not decoupled from the rest of the world," said Rashesh Shah, CEO of Edelweiss Capital.