Global chill sends 2000-pt shiver down Sensex

At one stage, the Sensex had plunged 2062.22 points, the biggest intra-day fall in the widely tracked index ever. Investors wealth 8212; or market capitalisation 8212; fell by a huge Rs 6,67,000 crore to Rs 59.59 lakh crore in a single day.

The slide for the sixth straight day prompted the government to caution investors against market rumours, while blaming global uncertainties for the fall.

8220;Orderly growth of the capital market is a priority of the government. I want to assure the citizens of India that sustained growth of the market is a priority,8221; Prime Minister Manmohan Singh told reporters in New Delhi. Fundamentals of the Indian economy remain strong, he said.

Reserve Bank governor Y V Reddy said in Mumbai that global financial markets have become far more uncertain than before and the RBI will consider a possible slowdown in the US economy while reviewing its monetary policy.

The sharp fall was triggered by setback in global markets, selling by foreign institutional investors, mega IPOs and margin calls after a proposed US stimulus package failed to soothe fears that the US will tip into recession.

Other Asian markets reeled under huge losses. Hong Kong8217;s Hang Seng down 5.49 per cent, South Korea8217;s Seoul Composite down 2.95 per cent, Taiwan8217;s Taiwan Weighted down 0.91 per cent, China8217;s Shanghai Composite down 5.14 per cent and Japan8217;s Nikkei 225 index down 3.86 per cent fell on global concerns.

On Friday, Dow Jones industrial average lost 60 points, or 0.49, a 16-month low after Wall Street was disappointed by US president George Bush8217;s 150 billion package of tax cuts and other measures. Dismal reports on employment, retail sales, factory activity and housing construction this month suggested that the US, the world8217;s largest economy, may be heading into recession.

On a closing basis, Sensex8217;s previous biggest single day point fall was on May 18, 2006, when it plunged 826 points or 6.75 to 11,391, spooked by a government circular on taxing investment gains and heavy FII selling. With today8217;s fall, the BSE Sensex has eroded 3601.42 points or 16.98 per cent from a record high of 21,206.77 hit on January 10 this year. The broader CNX S038;P Nifty declined 496.50 or 8.70 per cent to 5,208.80.

Small and mid-cap stocks were battered today. The BSE Mid-Cap index tumbled 11.38 per cent while the BSE Small-Cap index crashed by 10.27 per cent to 10,911.66. Both these indices underperformed the Sensex. All sectoral indices registered steep losses of 5-13.3 per cent. Reliance Energy which plunged 16 per cent was the top loser from the Sensex pack.

Analysts say India will follow global cues in the coming days. 8220;As housing is already known to be the weakest link of the US economy, markets will be looking towards next week8217;s raft of data such as durable goods orders and personal income and outlays, as well as the FOMC meeting on Tuesday and Wednesday. At this point, a 50 bps rate cut has been fully priced in and seems the most likely outcome, though there is some speculation that the Fed will deliver a 75 bps cut to try to keep a floor on growth,8221; said George Worthington, Chief Economist, Asia-Pacific IFR Markets, Thomson Financial.

A big cut in interest rates by US Fed will boost emerging markets like India. FIIs have been big sellers in the market of late. They have withdrawn around 1.4 billion in the last three days of last week, leading to a 1814-point loss in the Sensex. The market estimates that FIIs have withdrawn another 500 million today.