Sensex hits 4-month low, bonds fall

War drums beating in Mid-East are finding their echo on Indian financial markets. Bears tightened their grip over stock markets even as bond...

War drums beating in Mid-East are finding their echo on Indian financial markets. Bears tightened their grip over stock markets even as bond prices fell in the securities market. While the rupee too declined on war jitters, gold’s glitter continued. Sensex crashed by 37 points to touch a four-month low as equities went into a tailspin at the BSE amidst across-the-board selling on renewed fears of a war. ‘‘The sentiment in Indian markets weakened as stock markets tumbled worldwide amidst reports of an increasing possibility of a US-led strike against Iraq appeared stronger than before,’’ said stock dealer R.A. Poddar.

Sensex opened at the day’s high of 3,182.16 points and fell to the low day’s low of 3,142.89 points before staging a moderate recovery to close at 3,153.06 points, showing a net loss of 37.29 points, or 1.17 per cent, from the previous close of 3,190.35 points. The BSE Sensex has so far lost a whopping 130 points in last five sessions. Equities in both new and old economy sectors turned weak on sustained selling pressure, dealers said. Stock in software, media, cement, PSU, banking, telecom and steel suffered a major setback in the sell-off.

BONDS DOWN: Bond prices slumped across all maturities at the secondary market for securities on a fresh wave of relentless selling amidst fresh war fears after the tough rhetoric by the US against Iraq ahead of a crucial report by UN chief inspector Hans Blix. Government bonds fell by over 150-250 basis points across the spectrum after operators unloaded G-Secs following the imminent threat of war on Iraq, dealers said.

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RUPEE WEAK: The Indian rupee ended weaker on Friday, although off the day’s trough, after fears of an imminent US-led attack on Iraq sent importers scurrying to cover short dollar positions. The local unit finished at 47.6475/6550 per dollar, up from 47.6925 hit on news that parts of a fence demarcating the Iraq-Kuwait border had been dismantled.

The Indian rupee could come under pressure if war breaks out as oil is India’s largest import item. Rupee premiums on the forward dollar, which had also risen on war concerns, eased off highs towards the end of trade. The six-month annualised premium finished at 3.57 per cent, off a day’s high of 3.60 per cent but up from the previous close of 3.44 per cent.

BUT GOLD IS SHINING: Gold recovered smartly on the bullion market here due to fresh bouts of buying activity and firm global advices following the increasing geo-political tension. Silver followed suit and closed with fresh gains.

The sudden panic buying was caused after President Bush’s statement, analysts said. Standard gold opened better at Rs 5,610 and rose further smartly to end at Rs 5,645, showing a smart recovery of Rs 45 over Thursday’s close of Rs 5,600. Ready silver (.999 fineness) showed a good recovery of Rs 40 over the last close of Rs 7,890.

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