After a strong rally last week, the Bombay Stock Exchange Sensitive Index, or Sensex, wiped out almost 50 per cent of the gains today.
The Sensex, which had closed in the green for the past three weeks, fell 480.35 points, or 4.8 per cent, to close at 9,568.14 points. The CNX Nifty slipped 4.2 per cent to 2,978.15 points.
The slide was caused largely by rising uncertainties over the US government’s auto industry package to General Motors (GM) and Chrysler (see accompanying story on this page) and continuing problems in banking and some profit booking by foreign institutional investors (FIIs).
On Friday, US Treasury Secretary Timothy Geithner said some US banks may need more government aid. As a result, US markets closed in the red and were down sharply on early Monday trading (see table).
“This correction was expected due to a weak closing in the international markets on Friday. During the weekend, the news worsened because of the uncertainty regarding further US government’s assistance to auto majors General Motors and Chrysler,” said Amitabh Chakraborty, head (equities), Religare Securities.
In the domestic market, the sell-off was seen largely in banking, realty and metals. Besides healthcare and consumer durable indices, which rose 0.52 and 8.52 per cent respectively, all other sectoral indices fell in today’s trade.
| Price (Rs) | % Chg* | |
| SENSEX LOSERS | ||
| Jaiprakash Asso | 78.50 | -12.34 |
| ICICI Bank | 337.95 | -12.27 |
| Tata Steel | 196.15 | -12.24 |
| Reliance Infra | 502.45 | -11.43 |
| DLF | 165.55 | -9.34 |
| SBI | 1022.00 | -9.18 |
| TCS | 522.75 | -9.12 |
| Hindalco | 50.20 | -8.81 |
| Tata Motors | 172.30 | -8.74 |
| HDFC | 1450.55 | -8.72 |
| * over previous close | ||
The banking index took the biggest hit, slipping 8.58 per cent today, followed by metals (7.40 per cent), realty (7.24 per cent) and information technology (4.43 per cent).
|
% Chg* | |
| AMERICA+ | |
| Nasdaq | -3.12 |
| Dow Jones | -3.65 |
| EUROPE** | |
| FTSE 100 | -3.49 |
| ASIA** | |
| Hang Seng | -4.7 |
| Nikkei 225 | -4.53 |
| Straits Times | -4.15 |
| Shanghai | -0.69 |
| + till midnight (IST) ** closing trade | |
FIIs were net sellers of Rs 452.32 crore worth of equities, according to BSE provisional data on Monday. FIIs had pumped in Rs 2,597.81 crore in the past week. Domestic institutional investors were net sellers of Rs 49.38 crore.
Ridham Desai, managing director and co-head of Morgan Stanley, recently pointed out in a research report that the pressure on the income statement of banks is likely to be quite intense going forward.
“We estimate 6 per cent non-performing loans in their base case, whereas the bear case could take it to 8 per cent,” the report said.
Technical analysis so far shows that the markets have support levels at 2,800 points. Divyesh Shah, CEO, India Bulls Securities, said, “The Nifty has strong support at 2,800 levels. On the upside, there is resistance at around 3,100 points.
