Mumbai, Oct. 4: Stocks tanked as investors hit their sale buttons amid a welter of worries over expensive valuations heading into another results season and the sharp slowdown in the US economy.

The benchmark BSE sensex plummeted 162.38 points to 12204.01 as investors scooped up gains and refrained from booking fresh positions.

Brokers attributed various reasons for the sudden bout of selling. While a leading foreign brokerage has forecast that the US economy will only grow by over 1 per cent during this year, sharply lower from over 3 per cent last year, there are mounting concerns that this will spark lower tech spending, thereby affecting the earnings of domestic software service companies in the months to come.

These fears were compounded by reports that more hedge funds were facing tough times. After the Amaranth fiasco, it is learnt that hedge funds run by Vega Asset Management lost in excess of 10 per cent last week. Vega, based in New York and Madrid, was supposed to be one of the world’s fastest-growing hedge funds. It is understood that hedge funds have been aggressive sellers in the futures market.

For the domestic equity markets, these concerns have come at a time when the benchmark index is well over the 12,000-mark. Analysts say that with second quarter results only round the corner, most of the investors are now trying to play it safe.

“The markets were over-heated. The first quarter results, which were very good, have already been discounted by the current market prices. Therefore, it was expected that some profit booking would come before the onset of the results season,” says Dilip Davda, an investor.

Like others, Davda believes that the markets are likely to take a pause over the next few days and that a firm uptrend will be visible only after the second quarter results come in.

This comes at a time when crude oil prices, always a cause of worry, have been on the wane in recent times. Though crude prices, which are now at seven-month lows, led to refineries like BPCL and HPCL ending in the positive territory, many in the IT and banking sectors witnessed hectic selling pressure today.

Infosys Technologies will kickstart the second quarter earnings season in October 11. In a research report ahead of the results, CLSA has said that while Infosys is likely to report a strong quarter on topline and margins, Wipro is expected to show an improved second-half performance. However, this observation failed to curb the selling pressure and almost all IT stocks ended in the red.

The sensex, which rose to 12419.65 in early trade, came under pressure from noon and subsequently it was seen gradually moving downwards to the day’s low of 12178.83 before closing at 12204.01.