The Telegraph
Since 1st March, 1999
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Global heat melts stocks

Mumbai, March 14: A global stock market meltdown came back to haunt domestic investors today.

As Asian indices plummeted deep into the red, domestic bourses that were showing signs of stability over the past few trading sessions saw an almost across-the-board fall. The BSE sensex slumped 453.36 points to close at 12529.62. The crash was triggered by a crisis in the US sub-prime mortgage market. This is a market where a lender provides money to borrowers who get loans from mainstream lenders.

Latest reports from the US talked about rising delinquencies in this market and led to worries that the world’s biggest economy was slowing down. While less than expected retail sales from the country lent some credence to such worries, the news led to weakness across Asia.

Market observers said amid signs of a slowdown in the US economy and a rise in value of the yen, there was fresh unwinding of Yen Carry Trades. Both these factors got reflected in the Asian markets where Japan’s Nikkei tumbled by 2.92 per cent, Hong Kong's Hang Seng by 2.57 per cent, Singapore’s Straight Times by 3.35 per cent, South Korea's Kospi by 2.0 per cent and Taiwan’s weighted index plunged by 1.48 per cent.

“The sensex has been fluctuating ever since the US market faced delinquencies in the sub-prime lending market, a day before,” said Manish Sonthalia, vice-president and market strategist at Motilal Oswal Financial Services.

Sonthalia, however, added that the condition, which is capable of creating enough jitters across the Asian market, should actually not be a matter of concern for investors in India. “Indian markets can still be considered bullish in the long run and the crash has almost no relation with the performance of Indian scrips,’’ he added.

The 30-share sensex hovered between 13500 and 13600 for a large part of the session, before ending at 12529.62 against yesterday's close of 12982.98, a net fall of 453.36 points or 3.49 per cent. The broader S&P CNX Nifty of the National Stock Exchange (NSE) also plunged by a hefty 132.05 points, or 3.5 per cent, to settle at 3638.50 from the previous close of 3770.55.

All the sectoral indices on the BSE were in the red, indicating the depth of the crash. While heavyweights like Reliance Industries, Infosys, State Bank of India and Bharti Airtel wilted under selling pressure, the Bankex was the worst affected as it slumped 4.14 per cent or 270 points.

Despite the massive fall, a few observers continue to remain optimistic. According to them, there is nothing wrong with the domestic stock markets and investors should not worry. “Fundamentally there is no structural weakness with the Indian markets. Companies, specially the large-caps in the sensex, are doing sufficiently well in the ongoing financial quarter and we should have faith during this healthy transit,” said Amitabh Chakraborty, president (equities), Religare Enterprise.

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