Sensex in India Below 10,000, Down 52%

123jump.com Staff
17 Oct, 2008
New York City

Indian stocks plunged below 10,000 for the first time in two years led by a fall in financial and realty stocks. Weak investor confidence, tight interbank lending and rising interest rates played to the investor sentiment. Mutual funds redemptions stay at elevated levels.

[R]10:00AM New York, 7:30PM Mumbai – The market indexes dropped 6% and for the year plunge more than 50%. Global worries, weak foreign investors participation and mutual funds redemptions drag the index lower.[/R]

Market Sentiment

Indian stocks plunged below 10,000 for the first time in two years led by a fall in financial and realty stocks.

Weak investor confidence, tight interbank lending and rising interest rates played to the investor sentiment. Crude oil prices are now 50% below the peak in June of this year that will help in lowering inflation in months ahead. Rupee hovered near its low level against the U.S. dollar as foreign investors sell stocks.

An estimated 2 trillion rupees market value was wiped off in one day of trading. Reliance Industries lost 13,400 crore rupees market value and Bharti Airtel lost 10,400 crore rupees in market value.

In Mumbai, the Sensex fell 5.73% or 606.14 to 9,975.35, down 13.2% in the last three trading sessions, and the CNX Nifty declined 6% or 194.95 to 3,074.35.

Of the stocks traded on BSE 719 shares rose, 1,877 declined, and 56 were unchanged.

Trading Statistics

Daily turnover on BSE stood at 4,121 crore rupees from 4,552 crore rupees yesterday. Sterlite Industries dropped 12%.

RBI Removes Rules on FII Investment in Debt, Equity

The Reserve Bank of India aligned its regulation with the current directive from the Sebi and relaxed rules for foreign investors. Overseas investors can now allocate funds in their accounts to meet their investment objectives and are not required to hold 70% of funds in stocks and 30% in corporate or government debt.

International investors have withdrawn $11.6 billion from the Indian stock market and purchased debt worth $1.8 billion in the year.

Funds that are only considering investing in Indian bond market still require to register with the Sebi.

Gainers & Losers

Reliance Infrastructure fell 11.96% to 490.75 rupees, Jaiprakash Associates declined 10.7% to 66.75 rupees, Reliance Communications dropped 9.64% to 233.95 rupees and NTPC tumbled 9.68% to 149.75 rupees.

Realty stocks dropped but speculation that the RBI may cut interest rate dominated trading sentiment. Indiabulls Real Estate, DLF and Unitech fell between 10.4% and 14.2%. Parsvnath Developers declined 11.3%.

Financial stocks declined. HDFC Bank slid 5.82% despite 43% rise in the second quarter earnings through September. ICICI Bank and State Bank of India lost 5.8% and 8.4% respectively.

Utilities dropped. NTPC, Reliance Infrastructure, Tata Power Company Power Grid Corporation of India and Reliance Power shed between 3.3% and 12%.

Commodity stocks extended their losses on lingering worries over the condition of the global economy. Hindalco Industries, Sterlite Industries, Hindustan Zinc, National Aluminum Company, Steel Authority of India fell between 4.6% and 8.8%.

Tata Steel plummeted 8% after its UK subsidiary Corus announced production cut of 20% or 1 million tons in the next quarter on falling steel demand.

Capital goods stocks fell. Bharat Heavy Electricals, Larsen & Toubro and Suzlon Energy fell between 3.2% and 9%.

Satyam Computer Services plunged 2.6% to 265.95 rupees and the company raised its full-year earnings projection.

Elecon Engineering Company declined 6.6% after net profit declined 7% to 16.01 crore rupees in the three months ended September 2008.

Pritish Nandy Communications shed 2.1% and Chettinad Cement Corporation fell 2.6% after profit dropped 32.70% to 34.16 crore rupees in the second quarter in September 2008.

Hindustan Petroleum Corporation soared 3.29%, after the company formed a subsidiary for production of biodiesel.