Global tremors hit Dalal St, Sensex tanks 769 points

Dalal Street joined a global stock sell-off after signs of accelerating inflation in the US dampened...

Dalal Street joined a global stock sell-off after signs of accelerating inflation in the US dampened hopes that the Federal Reserve will cut interest rates further to shore up the struggling American economy. Many Asian markets fell over three per cent with the 30-share BSE Sensex slumping 769.48 points, or 3.84 per cent, to 19,261.35.

The S&P CNX Nifty declined 270.7 points, or 4.48 per cent to 5,777 on the National Stock Exchange. “The market witnessed major correction as Sensex tumbled more than 850 points at one point of time in late trade tracking weak global markets. Metal, realty and power stocks declined sharply in late trade. Capital goods and banking stocks also declined heavily,” said top dealer Asit C Mehta.

Benchmark indices in four other Asian markets — Australia, Hong Kong, Singapore and Taiwan — sank more than 3 per cent. Investors sold stocks after the Wall Street tumbled on Friday following figures that showed US consumer prices rose 0.8 per cent in November, the largest increase in more than two years. That raised questions about the Fed’s options for supporting the economy, which has been buffeted by a credit crisis and housing slump, by lowering interest rates.

Said Amitabh Chakraborty, president-equity, Religare Securities: “The risk level in the global market has increased post financial turmoil and due to higher risk of US slowdown indicated by the increase in consumer price index. US economy seems to be caught in a vicious cycle where it is under the threat of a recession but is facing higher inflation due to devaluation of dollar.”

According to Chakraborty, although the Indian market has shown signs of decoupling over the last few months, a consistent out-performance will be difficult since India is impacted by changes in global risk. “Today we saw that initially large caps bore the greatest impact but later on mid-cap index also followed. We feel the situation will ease as we near an imperative rate cut in the US, taking the view from US CPI,” he said.

The sectors which have been outperforming fell the maximum — namely real estate, power and capital goods. The market opened with a negative sentiment taking cues from the weak closing in US and the effect perpetuated during the later half with weak opening in the European market.

The fall comes after some investors were disappointed that the Fed cut interest rates by just a quarter point last week instead of the more aggressive half-point that some had hoped for. “Asian investors pay close attention to the US economy because it is a major export market. Of late, Indian market has been following the US trend,” said a dealer. “The triggers to be watched are Q3 results, budget, higher investment allocation for the Indian market and rate cuts in US and India.”

Market cap plunges

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MUMBAI: Monday’s market crash — the second biggest fall in its history in terms of points — has made investors poorer by several lakh crore. Market capitalisation — total market value of all listed shares — fell by Rs 300,500 crore to Rs 65.11 lakh crore in the selling spree. The biggest Sensex fall was on May 18, 2006 when the index plunged by 826 points.

BSE Sectoral Indices

Auto TVS Motor -8.7%, Ashok Leyland -7.7%

BANKEX Kotak Bank -8.2%, Oriental Bank -7.2%

CD Titan -5.6%, Videocon -5%

FMCG Tata Tea -7.1%, Dabur India -4.7%

IT Aptech -9.7%, Financial Tech -6.5%

Metal JSW Steel -13%, Jindal Saw -10.1%

Oil & Gas Essar Oil -11.2%, HPCL -8.5%

Power NTPC -7.3%, GMR Infra -7.2%

PSU Indian Bank -10.2%, Vijaya Bank -9.2%

Realty Puravankara -10.3%, Peninsula -8.5%

TECk Aptech -9.7%, UTV Software -8.6%