India joins global markets in stock sell-off

India joins global markets in stock sell-off
ENS ECONOMIC BUREAU

MUMBAI, OCT 11:Indian stock markets joined other world markets in a major sell-off in battered infotech and telecom stocks. The benchmark Sensex of the Bombay Stock Exchange (BSE) nose-dived by another 108 points to hit a 16-month low of 3836.51 points as share prices witnessed across the board decline following sustained selling pressure by local investors and foreign funds.

This was the second major fall in Sensex in the last three days. The benchmark index had tumbled by 111 points on Tuesday amidst heavy selling spree by market players. Dealers attributed Wednesday's fall to four major factors: downward revision of India's rating by global rating agency Standard & Poor's, overall bearish trend in major international bourses, lack of buying support from institutional investors, fresh fall in the rupee value and lower forecast of GDP growth by the Centre for Monitoring Indian Economy (CMIE) and the Reserve Bank of India.

On the other hand, Asian stocks staggered in negative territory on Wednesday as Nasdaq woes battered technology and telecom sectors in Japan, Singapore and Taiwan and forced a halt in Korea's benchmark index futures contracts. Tokyo's benchmark Nikkei average ended at an 18-month low, finishing down 1.98 per cent at 15,513.57. The tech-heavy Nasdaq composite index of the US fell more than 3.40 per cent to close at 3,240.53, putting it near this year's closing low of 3,164.55 set on May 23.

Hong Kong stocks ended down nearly three per cent on Wednesday, their lowest level in a week. The Hang Seng Index ended down 2.75 per cent or 427.11 points at 15,127.00, extending a four percent slide since the start of the week. South Korea's benchmark KOSPI index tumbled 5.30 per cent to 557.18, dragged down by index heavyweight Samsung Electronics.

In India, the BSE Sensex opened substantially down at 3892.78 and gradually moved lower to the day's low of 3803.72 before closing at 3836.51 as against yesterday's close of 3945.28, netting a fall of 108.77 points or 2.76 per cent. The BSE-100 index dropped by 61.96 points to 1912.54 from previous close of 1974.50.

Close on the heels of prevailing nervousness over the proposed rolling settlement which has provoked operators to heavily unwind positions and continuous downslide on Nasdaq, news that S&P has downgraded the rating outlook on India's long-term foreign currency credit rating to "stable" from "positive" fuelled a fresh sell-off in equities. The fresh erosion in the value of the rupee to 46.35/38 against the dollar also affected the sentiment. In the specified group, 108 counters including 26 index-based shares registered sharp to moderate losses while 32 showed some gains.

Satyam Computer dipped by 58.65 to 410.05. Infosys Tech was down by 488.20 at 6800.50, Global Tele by 37.45 at 1032.30, Himachal Futur by 129.80 at 1082.90, Zee Telefilm by 9.55 at 408.15, Castrol by 13 at 221.05, Grasim by 7.20 at 172.30, MTNL by 3.45 at 124.65, NIIT by 66.60 at 1238.05, RIL by 5.05 at 330.15, SBI by 3.65 at 167.80, TISCO by 4.45 at 87.90, Wipro by 143.90 at 2283.15 and SSI Ltd by 130.65 at 2095.80.

Although marginal support came from stocks like ITC, L&T and Bhel, it was not strong enough to generate a smart rally from the lower position. ``With the latest fall, the index closed at its previous support of around 3830 points. The outlook however is yet to improve. The next support for the Sensex is at around 3600 points. As far as upward direction is concerned, it would be of corrective nature, and the market will find it difficult to sustain,'' said an analyst.

The position of tech stocks has weakened further. Infosys and Satyam Comp were mainly responsible for Wednesday's fall. The position of heavyweights like HLL, ITC and Reliance is also far from impressive. ``Ovearll, the outlook appears negative and a further decline is likely from the current levels. Even if a fall does not occur from the current level, the upside is likely to be limited at this juncture,'' analysts said.