Melting stock prices today pulled down the Bombay Stock Exchange benchmark Sensex below the 10,000 points level for the first time in over two years, as funds remained aggressive sellers.
The 30-share index, which opened higher by 205 points, tumbled by 582.76 points to 9,998.73 in pre-close trading, a level last seen in June 2006.
The wide-based National Stock Exchange index Nifty, which gained 66.65 points at the initial stage, plunged by 196.35 points, or 6 per cent at 3,072.95 points at the same time.
All the sectoral indices, led by realty sector were ruling in the red with steep falls, dragging the Sensex down.
With negative economic news flowing continuously across the global markets, bears geared themselves for fresh spell of selling. Despite Europe opening on firm note following a rally in the US markets, it failed to lift investor sentiments as persistent selling by foreign investors is a major concern for the markets.
World economies are deteriorating, unemployment is rising and corporate worldwide are posting weak results, sketching an extremely gloomy picture of the global economy. “Investors are extremely worried as the future looks uncertain and present wobbly,” said a dealer with a large broking firm.
CLSA has reduced India’s GDP growth outlook to 6.5 per cent in view of considerable decline in the IIP data for last couple of months.
Authorities across the world are trying their best to restore confidence in the global markets by infusing money and cutting interest rates. However, players are so uncomfortable that they are taking each opportunity to pile up cash on concerns the credit expansion will fail to stem the crisis and may not avert the approaching recession.
The depth of the current financial crisis is unknown partly because most financial institutions don’t disclose they are in trouble until after the fact, a Purdue University expert says. “The question we don’t know is how deep the recession will be and low long it will last,” says Sugato Chakravarty, a professor and head of the Department of Consumer Sciences and Retailing.
The global credit crisis is intensifying, and enough damage has been done to the global economy which ensures the next couple of quarters will be much weaker. The pendulum has swung sharply to the downside risks to growth rather than inflation.
US industrial output fell 6 percent in the third quarter, the most since 1991, and a factory index for the Philadelphia region hit an 18-year low this month. Reuters/Jefferies CRB Index tumbled 3.2 per cent on Thursday as the demand for the commodities declined.
On domestic front, India’s Index of Industrial growth in August slipped to a 10-year low at 1.3% compared to 10.9% in the year-ago period. However, India’s inflation has cooled off to 11.44 per cent in the 12 months to Oct 4, below the previous week’s annual rise of 11.80 percent.
“The worst is not yet over. Given the awful US industrial output data the recessionary fears are getting dense. Though India’s inflation cooled off from previous week, it still running in double digits and also the IIP data was pathetic. The overall trend looks bearish which will have direct impact on the markets,” said Rohan Kanse, analyst at Flexion Capital Management.
“The 3100 level has now become vital for the Nifty. If we breach the 3100 support and close below that level in the near term, then the next support is seen at 2900 and then directly at 2600 level. Intraday, Nifty support is seen at 3120,” said Sharath Jha analyst at Global One.
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