Nasdaq crash pulls Indian markets down

MUMBAI, APR 13: Indian stock markets crumbled again on Thursday under the weight of Nasdaq's seven per cent slide overnight. With stocks l...

MUMBAI, APR 13: Indian stock markets crumbled again on Thursday under the weight of Nasdaq8217;s seven per cent slide overnight. With stocks led by Infosys and Reliance plunging 8 per cent, the benchmark Bombay Stock Exchange Sensex fell by 255 points following heavy unloading by speculators as well as selling by institutional investors.

The continued downslide in the Nasdaq Composite Index of the US which crashed by another 286 points last evening triggered heavy selling pressure as funds and investors lightened their holdings in the IT sector. Operators said selling was by funds as well as speculators, who were cutting positions ahead of an extended week-end. Stock markets are closed on Friday for a national holiday.

The revamped Sensex which has given more weightage to media and technology shares ended 4.69 per cent, or 254.69 points, down at 5,172.13. The index was at one stage down by nearly 320 points. The 50-share National Stock Exchange NSE Samp;P Nifty index closed 4.40 per cent, or 70.15 points, down at 1,522.55.

Disappointed by the decision of Reliance Industries to fix the buyback price at Rs 303 per share, operators heavily unloaded their outstanding positions on the last day of the current settlement. As a result, Reliance shares ended down at the eight per cent daily limit of Rs 307.30 on brisk unloading.

8220;How much more can software shares rise,quot; asked a dealer at a local brokerage, adding that at its peak of Rs 13,812.90 316 in early March, market favourite Infosys Technologies had gained 25 times in the last year and a half. Infosys closed at Rs 9,262.20, down Rs 805.40. quot;Software shares are likely to face resistance at higher levels and they are yet to settle at lower levels,quot; he said.

8220;Software stocks are weak technically but cyclicals are gaining strength,8221; said an NSE dealer. BSE Sensex is now 15.70 per cent down from its all-time high of 6,150.69 in mid-February but is still higher than its 1999 close of 5,005.82.

Dealers said while the Indian technology sector8217;s high valuations were backed by earnings, they were discounted. The high-flying software sector led Thursday8217;s declines on the BSE with 12 out of 33 slumping eight per cent with another 11 losing more than five percent. Infotech stocks like Wipro, Satyam, Global Tele-Systems, Rolta, HCL and Pentamedia lost by nearly 8 per cent. Others like Zee Telefilms and HFCL also lost ground.

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quot;It was a panic and it feeds on itself and everyone just decided to bail at the same time,quot; said Arthur Hogan, chief market analyst at Jefferies amp; Co.quot;

According to Dalal Street circles, the major reason for the crash was the fall in world markets. The Nasdaq of the US as pummeled, falling 7.06 per cent, or 286.27 points, to 3,769.63 to log its second-biggest one-day point loss ever and its lowest closing price since January 6. Stocks ended weaker in Hong Kong, Taiwan, Malaysia and the Philippines, while a switch out of TMT and into old fashioned financials in Singapore saw the Straits Times Index gain.

quot;This is just the way the momentum is now. Every day seems to be the same, with weakness in the Nasdaq,quot; said one Wall Street trader. quot;It8217;s sloppy.quot;Traders had not been nervous about Nasdaq8217;s month-long pullback over the last week. But on Wednesday, as the tech-driven gauge dropped below the 3,800 mark, many market players expressed concern about the next support level. quot;If it goes lower, well, I don8217;t want to know what8217;s next,quot; another trader said.

quot;It is an ongoing rotation from the new economy to the old economy,quot; said Pierre Ellis, senior economist at Primark Decision Economics. quot;Where it is all going to settle, it is hard to say.quot;