Bear grip sends key Indian index below 10,000 again (Lead)November 11th, 2008 - 3:36 pm ICT by IANS
Mumbai, Nov 11 (IANS) Bears were again on the rampage in the Indian equities markets Tuesday, just as had feared, the last two sessions’ upward rally proving short-lived. A key share index shed nearly 600 points by mid-afternoon to once again go below the psychologically important 10,000 mark.“New casualties of the global financial tsunami are being exposed on a daily basis and the crisis is clearly far from over so this kind of crash is only to be expected,” said Jagannadham Thunuguntla, head of the capital markets arm of India’s fourth largest share brokerage firm, the Delhi-based SMC Group.
After two successive days of gains, bears were again on the rampage in Indian equities markets Tuesday and by mid-afternoon the 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) was ruling at 9,964.08, down 572.08 points or 5.43 percent from its previous close Monday at 10,536.16 points.
The Sensex opened weak at 10,405.39, down 130.77 points or 1.24 percent from its previous close and continued to fall to hit an intra-day low of 9,947.07 points before inching back a tad to its current value.
The broader-based 50 share SP CNX Nifty of the National Stock Exchange (NSE) also showed a similar trend and mid-afternoon was ruling at 2979.35, down 168.9 points or 5.36 percent from its previous close Monday at 3148.25 points.
The BSE midcap index was ruling at 3,384.75, down 90.34 points or 2.60 percent from its previous close at 3,475.09 points.
The BSE smallcap index was ruling at 3,920.51, down 67.52 points or 1.69 percent from its previous close at 3,988.03 points.
US markets had closed with losses overnight with the key index of the New York Stock Exchange finishing 1.19 percent down and the Nasdaq closing 1.86 percent down.
Tuesday morning the Nikkei, key index of the Tokyo Stock Exchange down 0.60 percent. The Hang Seng, key index of the Hong Kong Stock Exchange, however, was showing a gain of 0.34 percent.
“In the US two more commercial banks went bankrupt Friday bringing the total tally of bankrupt US commercial banks to 19 apart from the investment banks that declared bankruptcy,” Thunuguntla said.
Similarly, D. Carnegie Co. AB, the 205-year-old Swedish investment bank, had its license revoked Monday by the country’s regulator and will be put under supervision of the national debt office.
Carnegie took “exceptional risks” awarding loans, the watchdog said while revoking its license. “So no one seems to be safe,” Thunuguntla said adding even the iconic General Motors (GM) is as good as bankrupt.
The Deutsche Bank has downgraded GM and in a capital markets report has said that the bank has set a zero dollar target for the company’s share price.
“That effectively means Deutsche Bank thinks that even if GM is not filing for bankruptcy, it is as good as bankrupt,” Thunuguntla said. Another iconic US company Ford Motor is also facing a similar situation.
There is no end to the bad news, he said pointing out that the US mortgage firm Fannie Mae has reported a quarterly loss of $29 billion. “That is a huge loss for a single quarter by any standards,” he said.
The only good news is the Chinese revival package of $586 billion, a figure that is nearly 15 percent of that country’s gross domestic product (GDP).
“In 1990, during the Asian crisis, China had announced a similar revival package but then its size was just 1.5 percent of the country’s GDP,” Thunuguntla said, adding: “It shows how seriously the Chinese are taking the current situation.”
“The other good thing about the package is that it is aimed at increasing economic activity by creating jobs, creating demand and directly boosting the real economy unlike in the US where money is being pumped into near bankrupt banks without really stimulating the economy,” he said.
“US President-elect Barack Obama may also announce something similar but he can do so only after Jan 20 - till then the US economy has to fend for itself and that is not very reassuring,” he said.
For all these reasons, the underlying sentiment is clearly that of great nervousness and there is simply no energy or enthusiasm for bulls to sustain any rally, analysts said. Even the last two days of gains saw very thin turnover of about Rs.430 billion which is a third of peak turnovers achieved in January this year, they said.