Mumbai, March 5: A global meltdown in stocks triggered a selling avalanche on Dalal Street and hammered the sensex to a five-month low of 12344.44.
With Asian indices, led by Japan’s Nikkei, gasping in a sea of red and no worthwhile triggers available at home, the sensex plummeted by 471 points. The benchmark index has sunk by 2300 points from the high of over 14700 on February 9.
Concerns over a slowdown in the US economy and ‘carry trade unwinding’ in yen battered the stocks. Carry trade unwinding is borrowing yen at Japan’s low interest rates to buy assets with higher returns in other markets.
The US economy and the deft play with the yen rattled investors in Asia where all the indices took a massive beating. Japan’s Nikkei tumbled 575.68 points to 16642.25, its highest one-day percentage loss in nine months, while Korea’s Kospi index finished 2.71 per cent lower and Hong Kong’s Hang Seng sunk 777 points, a decline of 4 per cent.
The global tremors started on Tuesday (February 27) when Chinese stocks fell by more than 9 per cent, its steepest fall in 10 years.
This was followed by fears of a slowdown in the US, following former Fed chairman Alan Greenspan’s warning of a possible recession later in the year.
Indian investors were further saddled with the absence of any positive cues at home. The budget was disappointing in the absence of reforms, while finance minister P. Chidambaram came down heavily on cement, infotech and the realty sectors. The foreign institutional investors (FIIs), who have winched up stocks to new heights, have sold more than Rs 3,000 crore since February 26.
“The fall therefore has a global and local angle to it. Domestically, there are concerns of high valuations. Moreover, there are no major factors that could propel stocks. In such conditions, participants are paying more heed to the global developments,” a broker said.
Tracking the weak trends in Asia, the sensex resumed with a wide gap at 12716.85 from the previous close of 12886.13 and tumbled to a five-month low of 12344.44, a loss of 542 points within the first 30 minutes of trading. It ended at 12415.04, a net fall of 471.09 points, its fifth biggest point-wise fall, or 3.66 per cent.
Similarly, the broader S&P CNX Nifty of the National Stock Exchange (NSE) crashed by 150.25 points to 3576.50 from its previous close of 3726.75.
Heavyweights like Infosys and Reliance provided scant comfort in a day when there was an across-the-board fall in most counters.
Not only the sensex, which slid by 3.66 per cent today, but the BSE small-cap index also fell by 375 points or 5.64 per cent and the consumer goods index by 5.51 per cent.
The story was the same for the BSE Auto index, which fell by 5.18 per cent, the BSE Bankex which shed 3.51 per cent and the BSE IT index which was down 4.52 per cent.
Analysts said the sensex may not have bottomed out and apprehended more pain for investors in the short-term.
“Fundamentally, not much has changed. However, for the short-term, it’s very much in the hands of the bears. It will take some time for the markets to stabilise,” warned Harendra Kumar, head, research, ICICI Securities.