Sensex crashes 196 points in heavy sell-off

Sensex crashes 196 points in heavy sell-off
ENS ECONOMIC BUREAU

MUMBAI, SEP 18: Indian stock markets witnessed a massive sell-off as the spiralling international crude oil prices and the imminent hike in petroleum products prices led to panic selling by investors on Monday. The bellweather Sensex crashed by 196 points, or 4.3 per cent, and the market capitalisation - investors wealth in terms of the total market value of listed shares - fell by Rs 27,577 crore to Rs 7,35,830 crore on the Bombay Stock Exchange.

The stock gloom was not restricted to India alone as other Asian markets also joined the sell-off. The Korea Composite Stock Price Index (KOSPI) finished 8.06 per cent lower at an 18-month low of 577.56. Hong Kong stocks sank by six per cent to its lowest level in more than three months, stung by falling Asian stocks and rising oil prices. Taiwan stocks closed at its lowest level since March 1999 as margin calls and fears of economic problems hurt confidence.

At home, discouraged by the proposed petro price hike once Prime Minister Atal Behari Vajpayee returned from the US, local investors, institutions and foreign funds unloaded their holdings in key stocks. The fall in the rupee value against the dollar to the 46-level further aggravated the situation. With this fall, Sensex had fallen by a whopping 305 points in the last two days.

The BSE Sensex opened substantially down at 4511.42 and gradually moved downwards nose-diving at the fag end to close at 4366.41 as against last Friday's close of 4562.38, showing a net fall of 195.97 points or 4.30 per cent. The BSE-100 Index collapsed by 97.83 points to 2200.10 from previous close of 2297.93.

"I am not bearish on the market, it is a little overbought and a correction was due. But we have to get this oil price hike out of the way," said Bombay Stock Exchange broker Ramesh Damani. The government is widely expected to raise government-set prices of petroleum products to offset rising global crude costs, currently near 10-year highs. Higher fuel prices are likely to hurt some old economy sectors such as cement, commercial vehicles and petrochemicals.

In the specified group, 100 counters including 26 index based shares registered sharp losses while 39 showed gains. Infotech, communication and entertainment (ICE) shares led the bear onslaught. Even old economy stocks joined the bandwagon with several key counters witnessing heaving offloading. Infosys, Global Tele, Zee Telefilms, Satyam, Reliance, MTNL, Hind Lever and HFCL lost heavily in the process.

"The price hike is expected, but the sooner the better," said BSE dealer Pawan Dharnidharka, adding, "It is the uncertainty that is hurting the market more than anything else." The near-term direction of technology stocks was harder to predict, analysts said. The stiff drop on the Nasdaq on Friday put pressure on tech shares but analysts noted Indian counters had lost ground through much of last week.

According to analysts, a correction was due in Indian markets after it gained nearly 14 per cent over the previous month. ``Speculative purchases had gone up recently. The long positions had gone up to Rs 3,156 crore due to a significant increase in net outstandings in frontline stocks. The major negative factor was the sustained firm trend in international crude oil market last week despite OPEC promise of bumping up crude output,'' said a fund manager.

Rupee too crashes

MUMBAI: The rupee too followed the stock market way and fell steeply against the US dollar. Sustained import covering by corporates and leading banks pushed down the rupee to a new all-time-low of 45.99-46.02 against the dollar, registering a net decline of 18 paise from its previous close.

According to dealers, volatile trading led to nervousness at the interbank foreign exchange (forex) also. The Indian rupee opened at 45.83/85 per dollar before closing at 45.99-46.02 per dollar, showing a net decline of 18-20 paise from the previous close of 45.77/78 per dollar.

It was on August 24 that the rupee had closed at an all-time low of 45.91/92 per dollar on heavy dollar demand from banks, market sources said. According to forex dealers, likely increase in oil prices in the international markets and fresh incidents in the gulf countries put pressure on the rupee which resulted into a sharp fall in the currency's value against the US greenback.

``There was no supply of dollars to meet the demand. The rupee is likely to remain under pressure, said the chief dealer at a leading private commercial bank.