Sensex crashes 461 pts

With strong suggestions of interest rate hikes across the major global markets and the fall in all Asian stock markets, there was no respite from relentless selling in the markets today and a 461-point fall in the Sensex seemed to confirm a definite bear phase in Indian equities.

The BSE Sensex plunged 461 points today to settle at 9295.81, its lowest closing since January 18, 2006. The NSE Nifty lost 136 points to close at 2724.35.

The Sensex has been trading below its 200-day moving average level for the last two sessions, signalling a major weakness in the markets, said technical analysts.

The 200-day moving average level is 9,670 for the Sensex and 2,900 for Nifty. Important technical support levels at both the indices were systematically breached and with no buy orders coming in, even the staunchest of optimists were left shaken.

Three sectoral indices "" the BSE Bankex, the BSE consumer durables and the BSE IT "" and three other indices ""- the BSE Midcap, the BSE Small-cap and the PSU index "" closed at six-month lows today.

Three other sectoral indices "" auto, fast moving consumer goods (FMCG) and the Oil and Gas index "" narrowly escaped touching their six-month low levels.

The Dow opened 100 points lower late this evening.

In New Delhi, the Prime Minister's Economic Advisory Council attributed the downslide to both global development as well as domestic issues, including the hike in fuel prices.

Talking to reporters after the council's meeting, its chairman C Rangarajan said: "The council was of the view that the bear hammering was the result of both global factors as well as domestic issues including the petroleum price hike."

With retail investors panicking, the mutual funds, which were earlier buying in the market, had also come under selling pressures, he said, adding that global factors were exerting pressure on the stock markets prior to the fuel price hike.

He, however, sounded optimistic, saying "my feeling is that the stock market is reaching its bottom."

Meanwhile, fears of a hike in US interest rates continued to drive stock prices southward and with domestic mutual funds turning sellers due to redemption pressures, the market found liquidity hard to come by.

The selling pressure was so intense that the market never really had any chance of bouncing back, despite a few large and midcap stocks showing some signs of resistance in mid-afternoon trades.

The market showed symptoms of recovery in mid-afternoon trade after having lost more than 550 points to touch an intra-day low of 9201. However, the sentiment worsened in late trading as European markets opened weak after the European Central Bank hiked rates.

"The global scenario has definitely changed significantly and all emerging markets are facing the heat. This has spoilt the mood here and we could see some buying interest at lower levels," said T P Raman, managing director, Sundaram BNP Paribas.

The hike in repo and reverse repo rates by RBI this evening is expected to further dampen sentiment.

"Most market men were expecting RBI to hike interest rates before July. So it is not much of a surprise, but the timing of this hike will not help the market. In fact, it will add to the general feeling of despondency," said Manish Kanchan, CEO, Ambit Capital.

The fall in stock markets across the globe added to the general despondency. The key Asian benchmark indices in Hong Kong, Japan, South Korea, Taiwan, Singapore and Indonesia were down in the range of 2.3-4.2 per cent today.

Fund managers are stocking up on cash to meet possible redemption pressure in a falling market, a dealer said. The outflow from equities by mutual funds in June stands at Rs 876.54 crore. They were net buyers of a whopping Rs 7893 crore in May.

Foreign institutional investors continued to be net sellers, though the volume of sales was considerably reduced. NSE data on FIIs suggests they were net sellers to the tune of Rs 20.7 crore at the markets today.

Rajesh Jain, director and CEO, Pranav Securities said, "The market fell right from the start of the day and stop-losses were triggered amid redemption pressure and there was no fresh buying in the falling market."

He added, "Once the fund flows get stabilised in the rising interest rate scenario and concerns of redemption pressure cool off, the market will bounce back. Nevertheless, the sharp fall has brought the market to value-based buying levels."

The market breadth was weak once again, with only 171 scrips, out of 2408 stocks traded on BSE, managing to end the day in positive territory. At NSE, only 26 scrips advanced, while 884 declined.

Trading volumes were higher than average today. BSE recorded a total turnover of Rs 3682 crore and the turnover on the NSE stood at Rs 8333.27 crore in the cash segment and Rs 24,463.13 crore in the derivatives segment.