US, yen blues make markets see red

Sensex slumps 471 points; investors lose Rs 5 lakh crore in just over a month.

A global stock rout, which began on February 27 in China, is taking the wind out of the domestic stock markets. A sharp drop in US consumer confidence and a strengthening yen, which is forcing foreign investors to dump their investments in riskier assets (including shares in India) funded by borrowings in Japan, have led to one of the sharpest falls on domestic bourses since last May-June's meltdown.

The Sensex fell 471.09 points or 3.66 per cent on Monday to reach 12,415.04. This is down 1,867.68 points (15 per cent) from the record high of 14,652.09 points on February 2. The broader Nifty-50 Index dropped 150.25 points or 4.03 per cent to 3,576.50.

The fall has also wiped out the gains of the last five months and over Rs 5 lakh crore in market capitalisation ($111 billion) since the February 2 high. All but two of the 30 stocks on the index declined.

"The fall has nothing to do with domestic markets. We are advising clients to allow the market to find its own bottom. The government is trying to control rising inflation and interest rates. We believe it will take some months. Investors should stay away till there is some control on these two fronts," said Dinesh Thakkar, chairman and managing director of Angel Broking.

Ranbaxy Laboratories was the biggest loser among the 30 Sensex stocks, plunging 7.56 per cent to Rs 321.15, while Dr Reddy's Lab, another pharma stock, was the third biggest loser (down 6.35 points to Rs 618.65).

Not surprisingly, the BSE Healthcare Index fell 4.64 per cent, the third heaviest loser among sectoral indices after the BSE Consumer Goods Index (down 5.51 per cent) and the BSE Auto Index (down 5.18 per cent).

Maruti Udyog, which shed 6.56 per cent to Rs 779.25, was the second biggest loser among Sensex stocks. Wipro lost 6.29 per cent to Rs 537.15, while L&T shed 5.52 per cent to Rs 1,383.75. Heavyweights Infosys Technologies, Reliance Industries, Tata Steel and Bhel were also down over 4 per cent.

The exchanges extended trading hours from on Monday until March 19 because the sun's position may disrupt information received via satellites. Trading at the National Stock Exchange and the Bombay Stock Exchange began at the usual 9:55 a.m. and ended at 4:15 p.m, 45 minutes after the normal close.

Asian stocks also tumbled. Hong Kong's Hang Seng was down 4 per cent, Japan's Nikkei fell 3.3 per cent, Taiwan Weighted lost nearly 4 per cent and Straits Times Index in Singapore shed 3.1 per cent.

European markets, which opened after the closure of Indian markets, continued the weak trend on worries over the strength of the US economy, volatile Chinese stocks and unwinding of yen carry trades (when investors borrow the yen to take advantage of low interest rates in Japan).

Foreign funds continued to be big sellers on the domestic markets, having sold as much as $1 billion worth of stocks in recent days, influencing the rupee as well.

Indian shares listed on the US market extended the losses in the domestic markets. Tata Motors (down 5.88 per cent to $ 16.80), was the biggest loser among the 10 Indian stocks listed on New York Stock Exchange.

HDFC Bank lost 4.21 per cent to $ 61.65, followed by Dr Reddy's Lab (down 3.91 per cent). Infosys. listed on rival Nasdaq, opened lower by 3.2 per cent at $ 51.40.

"Of late, the meltdown in stock markets is taking its cue from the world markets, particularly Asian markets. The slowdown in investments and the considerable net outflows from the emerging markets during the last week of February is another cause for worry," said Manish Bandi, vice-president of India Infoline.