Sensex sheds 766 pts

March 22, 2008

The Sensex recorded its second biggest single session loss on Monday last week (March 17 – 21, 2008) as weak global markets triggered a major sell-off in front line stocks.

Following a significant deterioration of its liquidity position, leading US investment bank Bear Stearnsh 2008, turned to the Federal Reserve and JPMorgan Chase for emergency funds. While JP Morgan agreed to buy Bear Stearns in an all-stock deal, the Federal Resever stated that it would fund up to $30 billion of Bear Stearns’ less liquid assets. The resultant weakness on the Asian bourses cast its shadow on the Indian turf and stock across the board went into a tailspin on Monday.

While the Sensex went crashing down by 951 points to 14,809.49, the broader 50 stock Nifty index of the National Stock Exchange lost close to 243 points as it tumbled to 4503.10.

A partial recovery in global markets aided the sentiment in early trade on Tuesday. But, with participants choosing to exit counters at every small rise, the market remained quite choppy that day and the Sensex managed just a marginal gain of 23.97 points in the end.

The 75 basis points cut in US interest rates triggered a rally across global markets on Wednesday and the Indian bulls had a good time as well. Better than expected results from Goldman Sachs Inc and Lehman Brothers also contributed to the recovery in US and Asian markets that day.

Blue chip stocks cutting across sectors had a smart ride up the charts till around mid afternoon. However, with traders choosing to tread a cautious approach ahead of a long weekend, several front line stocks gave up their gain in late afternoon trade. As a result, the Sensex, which had vaulted to 15,465.81 in early trade that day, ended the session at 14,994.83, up by a little over 160 points.

While the Sensex lost 765.69 points or 4.85% in the week, the Nifty, which settled at 4573.95 on Wednesday, suffered a loss of 171.85 points or 3.62%.

FIIs, who were relentless with their purchases since the beginning of Year 2003, have pulled out close to Rs 16,000 crore in less than three months in the current calendar year. Though domestic mutual funds remain net buyers, their net purchases, at around Rs 6,600 crore, has not been strong enough to keep the market at higher levels.

Advance tax paid by a few top notch companies turned out to be sharply higher. There were some stock specific developments too. But weak global markets, rising inflation and declining industrial growth rendered the mood highly cautious during the truncated week.

Among the sectoral indices, BSE CD went down by 11.54%. Mirroring heavy sell-off in the banking space, the Bankex slipped by 9.95%. The Metal and Realty barometers lost 9.07% and 8.11% respectively. BSE Oil & Gas (down 6.15%), Power (down 5.25%), PSU (down 4.49%), Healthcare (down 3.91%), CG (down 3.57%), Auto (down 3.1%) and FMCG (down 2.14%) also closed with sharp losses. The BSE IT edged lower by 1.08%, the same margin of loss suffered by BSE Teck.

Mid and smallcap stocks were mauled again. Reflecting the sharp erosion in values in these segments, the BSE Midcap and Smallcap indices crashed by 9.41% and 10.61% respectively.


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