Weak global mkts send Sensex crashing 678 pts

Bears roared back into action as weak global markets and selling by local and foreign investors sent bulls packing.

Bears roared back into action as weak global markets and selling by local and foreign investors sent bulls packing. The benchmark Sensex fell 678 points — its fifth successive fall and the biggest daily fall in more than a month — as losses in Asia and foreign selling raised worries that the market’s sharp rally was over. Investors wealth — or market capitalisation — fell by Rs 277,250 crore to Rs 61.10 lakh crore in the selling avalanche. The fall was across the board. While the BSE Sensex fell 3.5 per cent to 18,602.62, its lowest close since October 24, the mid-cap index fell 4.73 per cent, and the small-cap index dipped 3.98 per cent.

Said an analyst with India Infoline, “the health of the US economy, high oil prices and slowing foreign fund inflows were causing uncertainty.” The Sensex has fallen 6.7 per cent in the past five days, and is more than 8 per cent below a record high of 20, 238.16 hit on October 30.

Marketmen are worried over the losses in other global markets. Hong Kong fell 4.15 per cent, Japan lost 2.46 per cent, Singapore’s Straits Times was down 2.65 per cent, Taiwan’s Taiwan Weighted fell 2.27 per cent and South Korea’s Seoul Composite was down 3.49 per cent. “Global markets fell after the Federal Reserve said US economic growth would probably slow in 2008. If the US growth falls, then other markets will be affected,” said an analyst.

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Persistent worries about the impact of sub-prime mortgage defaults on US economy pulled stocks across Asia and Europe. The Japanese yen strengthened to a two-year high against the dollar and also gained against the euro as investors reversed carry trades, where they borrow yen to buy high-yielding but risky assets.

Oil is also giving jitters. Oil prices resumed their march toward $100 a barrel. Light crude for January delivery surged $3.39 to settle at a record $98.03 a barrel on the New York Mercantile Exchange. If oil prices surge above $100, it would cast a shadow over the markets, analysts said.

Adding to the woes, foreign investors have slowed down their purchases after the curbs on participatory notes. After foreign funds bought more than $7 billion of shares between mid-September and end-October, driving the BSE index to a series of record highs, FIIs have been net sellers of $400 million so far this month. Reason: inflows through the P-Notes route are restricted.

Said BSE dealer Pawan Dharnidharka, “the bull phase is not yet over. However, investors will have witness such corrections once in a while. It’s good for the health of the market. On Wednesday, ICICI Bank and infrastructure major Larsen & Toubro, which together account for more than 18 per cent of the main index, both fell more than 5 per cent. Index heavyweight and India’s largest private sector firm by market capitalisation Reliance Industries declined 2.33 per cent and the stock came sharply off session’s high of Rs 2,800.

BEARS STAGE COMEBACK

• other global markets fall by 2-4%

• Worries over US economy and subprime cast shadow

• High oil prices still giving concern

• Sensex falls 6.7% in last five sessions

• Market cap falls by Rs 277,250 cr on Wednesday

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