The Telegraph
Since 1st March, 1999
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Overseas cues play spoilsport

Mumbai, Nov. 21: The bears started to claw out value from stocks for the fifth straight day as a string of global cues — high oil prices, the Fed’s projection of a slowing down of the US economy and a weak dollar — prompted investors to scoop out profits on their investments.

The 30-share benchmark index — the sensex — today fell by 678.18 points to 18602.62, recording a loss of almost 7 per cent from 19929.06 on November 14, and hit the lowest level since October 24. Almost all sectoral indices dipped 3 per cent, while the metal stocks buckled 6.11 per cent.

On Tuesday, the US Federal Reserve cut its forecast for 2008 economic growth to a range of 1.8 per cent to 2.5 per cent — due to tight credit markets and weakness in housing. That is down from the July forecast of an annual growth between 2.5 and 2.75 per cent.

The Fed forecast has raised speculation that it can trim rates further at a crucial meeting due on December 11.

Market experts say the huge selling pressure prevailing in the Asian markets has sparked worries among Indian investors. Hong Kong’s Hang Seng and Japan’s Nikkei crashed by 4.15 and 2.5 per cent, while other Asian indices managed to end in the green.

The Nifty lost about 4 per cent and touched 5561, which, according to analysts, would be a comfortable mark to sustain for the time being. The other concern was oil prices which headed up to $98 per barrel.

“FIIs have sold stocks worth Rs 1,800 crore yesterday. Today’s fall is a mixed reaction of selling by the FIIs and weak global cues. Domestic liquidity is strong at present, and a certain degree of decoupling has already factored in. The F& expiry next Thursday should add some fillip to the markets,” said Manish Sonthalia, vice-president at Motilal Oswal Financial Services.

“Inflows into emerging markets have been affected by the US sub-prime crisis. If the Fed cuts rates on December 11, the Asian markets might again see an uptrend. We are expecting January to be a very good month for the Indian markets,” Sonthalia added.

“These corrections are very much in line with our expectations. The previous bull rally took the market to unexpected heights, which clearly suggested that the market will enter a correction phase next,” said Sree Sankar, head of research at IL&FS Investmart.

“Now investors can look for companies that engage in extraction of oil and similar businesses,” said V.K. Sharma of Anagram Stock Broking.

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