Mumbai, Aug. 26: The sensex plunged below 16000 today — tumbling at one stage to a 19-month low of 15765.53 — as stock markets around the world teetered on the knife-edge of anxiety ahead of a speech by Federal Reserve chairman Ben S. Bernanke that many felt would signal whether the US central bank planned to take steps to jumpstart a sputtering economy
Investors dumped stocks in a skittish market with financial institutional investors turning net sellers once again. The FIIs sold shares worth Rs 4,623 crore and bought stock worth Rs 3,113.90 crore, leading to a negative net investment of Rs 1,509.40 crore, according to data posted on market regulator Sebis website.
The benchmark index closed at 15848.83 — down 297.50 points, or 1.87 per cent — as market participants chose to pocket their bets for now and wait to hear what Bernanke would say at Jackson Hole, a mountain resort at Wyoming, USA, where central bankers were congregating.
A number of market men believed that Bernanke would choose to do nothing as he had run out of ammunition to help the US economy. But others were optimistic that he could announce the third round of quantitative easing — through an aggressive programme to buy US treasuries to funnel money into the economy. In the previous round which ended in June, the Fed had bought $2.3 trillion worth of US treasury bonds to keep the economy afloat.
Many felt if there were no major announcements from Bernanke, global markets could slide further. On the other hand, there are fears that a QE3 could take place igniting commodity prices — which could send inflation soaring in countries such as India. The Reserve Bank of India said in its annual report yesterday that a surge in commodity prices could force India to live with a higher than normal rate of inflation.
The sensex had started the day marginally better at 16155.55 and later hit a peak of 16256.38 before it ran into selling pressure.
The index has now dropped to its lowest closing since February 5, 2010.
Similarly, the 50-issue Nifty of the NSE plunged 91.80 points, or 1.90 per cent, to end at 1-1/2 year low of 4,747.80 — a level not seen since February 5, 2010.
The rupee also weakened 11 paise to close at 46.16 against the greenback.
As far as todays selloff is concerned, it is likely that market participants may have decided to reduce their positions ahead of this event (Jackson Hole), said Sanjeev Zarbade, vice-president (private client group research) at Kotak Securities.
Zarbade added that there were immediate worries on the domestic front as well as the governments entire focus was on the Lokpal bill and stock markets were concerned about the developing political situation.
On the BSE, all the 13 sectoral indices closed in the red, with realty, metal, oil & gas and bankex leading the fall. Mining and metal stocks were weak as the Supreme Court suspended mining activities at Tumkur and Chitradurga districts of Karnataka. Heavyweight stocks were battered with Reliance Industries recording a 52-week low during intra-day trades. It closed down 4.61 per cent at Rs 719.50.
ONGC toppled RIL and re-emerged as the countrys most valued company with a market valuation of Rs 2,37,842 crore against RILs Rs 2,35,571 crore.
Shares in firms controlled by Anil Ambani plunged after the National Stock Exchange announced it would exclude Reliance Capital from the Nifty index from October 10. Two other group companies — Reliance Communications and Reliance Infrastructure — dropped out of the sensex on August 8.
The SBI fell to a 52-week low during the trading session. The stock ended nearly 4 per cent lower at Rs 1,888.75.