India’s Sensex dips to two-year low below 12,000 points (Round-up)October 6th, 2008 - 7:35 pm ICT by IANS
Mumbai, Oct 6 (IANS) As fresh fears surfaced over major pullout by foreign funds and possible recession in the US economy, Indian equities dropped to a two-year low Monday, dragging a key index below the crucial 12,000-point mark.The 30-share sensitive index of the Bombay Stock Exchange (BSE) was languishing at 11,801.70 points at close to register a drop of a whopping 724.62 points, or 5.78 percent over the previous day’s close at 12,526.32 points.
The situation was no different on the National Stock Exchange (NSE), where the broader S&P CNX Nifty, a basket of 50 shares, was down 5.66 percent at 3,602.35 points.
“This has happened because of overselling by overseas investors and virtually no buying support from domestic investors,” said S.P. Tulsian, a noted investment advisor.
“The crash is a result in acceleration in foreign fund outflows coupled with fall of rupee amid fear of credit crisis in the west,” Tulsian told IANS.
Among the 13 sector-specific indices of BSE, consumer durables took the maximum beating, down 11.01 percent, followed by 9.91 percent drop for realty index and a 9.27 percent fall for metals index.
Each of the 30 shares that go into the basket of Sensex scrips ended with losses led by Sterlite, down 15.26 percent, followed by Reliance Infrastructure, down 13.93 percent, and Jaiprakash Associates, down 13.57 percent.
Looking ahead, analysts did not see any significant turnaround in fortunes.
“Living in a globalised world, we can no longer think India is insulated. The financial markets are integrated. There will be repercussions,” said executive director of Chennai-based Spark Capital advisors, K. Ramkrishnan.
“Tough times are ahead and IT sector is going to be affected. The $700 billion bailout in US will come with conditions - like no more outsourcing of jobs to India,” Ramakrishnan, who is also the head of investment banking, told IANS.
But analysts also expected some positive correction in the ensuing trading sessions after the markets watchdog removed some curbs on foreign funds, like the 40 percent limit on participatory notes and overseas derivative instruments.
The regulator also decided to review the entire working of foreign institutional investors (FIIs) in the country and said a policy paper will soon be floated so as to invite comments and suggestions from all stakeholders.
The decisions, taken at a meeting of the SEBI board here, were announced by its chairman C.B. Bhave and came even as the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) dropped to its lowest level in over two years, with a fall of nearly six percent Monday.
“We’ve gone back to the pre-October position,” he told a press conference.
“The 40 percent cap on assets under custody in the cash market will also be removed,” Bhave said, clearly signalling the regulator’s move to curb the outflow of investments by foreign funds.