Sensex falls off tenth floor

The Sensex is back at where it was on February 6, 2006. In nine months after hitting its all-time peak of 21,206.77 on January 10, 2008...

The Sensex is back at where it was on February 6, 2006. In nine months after hitting its all-time peak of 21,206.77 on January 10, 2008, the index has plunged 53 per cent, falling to four digits for the first time in more than two years. At the end of a 606-point slide on Friday, the Sensex stood at at 9,975.35.

The 11,000-point fall from January8217;s 21K peak has wiped out Rs 41,64,000 crore of investor wealth. Most blue chip counters are now trading below their 52-week levels.

The fall in the last nine months has been more than twice as fast as the rise 8212; it had taken 21 months for the Sensex to touch the 20,000 level from the 10,000 level.

The rout, led by foreign institutional investors FIIs, has been continuing unchecked despite a series of measures by the government. Even the fall in inflation has not helped. Speculation is now rife about a cut in repo rate by the Reserve Bank of India.

Domestic mutual funds have now joined the sellers bandwagon. Funds which invested Rs 2,292 crore in September have pulled out Rs 230 crore from equities in October so far.

So is four figures the bottom for the Sensex?

8220;There is no mechanism through which anyone can predict the level at which the markets will stabilise. What is hindering fresh fund infusion is that all investors are waiting for markets to stabilise. Once the willingness to invest returns, we will see the markets gaining ground,8221; said Anand Shanbhag of Avendus Capital.

What has worried even the smallest of retail investors is the indifference of domestic markets to the government8217;s repeated attempts at infusing liquidity in the system. Is the world getting into a recessionary period? How will India be affected by this?

What should be investors8217; strategy now?

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8220;Blue chip stocks are now available at extremely exciting valuations. They are trading at their single digit PEs price-earning ratios. The RBI has taken enough measures to ease liquidity in the system so there isn8217;t a crunch situation on the cash front,8221; Shanbhag said.