Sensex plummets to 10-month low, ICE melts again

Sensex plummets to 10-month low, ICE melts again
ENS ECOMONIC BUREAU

MUMBAI, MAY 11: Stock markets crumbled under the weight of falling global markets with the Bombay Stock Exchange Sensex plunging to a 10-month low. The fall which was confined to ICE stocks at the outset, later spread to other stocks in a major sell-off that created panic and confusion among investors.

Sensex, which was showing volatile movements in the last a few days, slumped by 207.04 points, or 4.64 per cent, to end at 4,251.36 off an intra-day low of 4,198.17. The index had last closed below this level on July 2, 1999 at 4,194.55 points. The BSE-100 index crashed by 112.61 points to 2148.33. The National Stock Exchange Nifty Index ended down by 58.60 points, or 3.75 per cent, at 1,304.55 from the previous level of 1363.15.

Said BSE dealer Pawan Dharnidharka: ``Both infotech and old economy stocks bore the brunt of heavy selling. Sustained heavy selling by foreign funds and unwinding of long positions by local operators sent the market indices into a tailspin.'' The weakness looked set to continue until next week when the US Federal Reserve meets to discuss an interest rate hike. The sentiment was affected due to further fall in Nasdaq which shed 5.59 per cent, or 220.28 points, to 3,384.73 on Wednesday.

Stock markets across Asia tumbled on Thursday after a sharp decline in US stocks prompted a sell-off that slashed 4.6 per cent off Tokyo's Nikkei average. "What we saw yesterday and what we're seeing again today is a reflection of growing risk-aversion -- globally," said Rebecca Patterson, JP Morgan's Asian market strategist. Japan's benchmark Nikkei average shed 819 points, or 4.63 per cent, to close just off its intraday low at 16,882.46, after investors unloaded large-cap tech stocks. It was the first time the Nikkei had closed below 17,000 since September.

Concern that global market weakness would hit fund-raising plans of many Indian companies is deepening negative sentiment in the technology, media and telecom (TMT) stocks. Software stocks had charged ahead till March this year led by a soaring Nasdaq but had suffered in the recent global meltdown.

In Mumbai, share prices opened with a huge losses on Thursday. A large number of software stocks opened at the lower end of the circuit. After a marginal recovery, stocks once again came under selling pressure during the second half, and a large number of software stocks even hit the lower circuit of 12 per cent. The impact of negative sentiment also affected non-software stocks.

Foreign funds were major sellers in Infosys, Satyam Computer, SSI, Wipro, NIIT, Global Telesystems, HFCL and other ICE stocks. Satyam Computer dropped by Rs 354 to Rs 2815. Infosys dipped by Rs 510 to Rs 7190, Zee Telefilms by Rs 74.45 to Rs 546.35, HFCL by Rs 120.85 to Rs 886.65, RIL by Rs 7.15 to Rs 318.10, Dr Reddy by Rs 38 to Rs 1279 and HLL by Rs 116.90 to Rs 2300.60.

Doubts had been raised on Indian software stocks, whose leaders command high multiples, after Nasdaq saw its Internet darlings plunge. However, India's profit-making software service companies, with annual revenues growing at an average of 50 per cent, are a lot sturdier than the Nasdaq's loss-making dotcoms whose valuations have been driven by factors like ideas and business models. ``There is a lot of rebalancing of portfolios by large funds going on. Since Infosys and other ICE stocks have the highest weighting in most funds, they have to be sold if a fund wants to buy other tech stocks which are attractive in a falling market," said an analyst.

The index had dropped to the ten-month low, losing steadily from an all-time high of 6,150.69 in mid February -- a loss of 33 per cent. Foreign funds were buying throughout that period. According to SEBI data, foreign funds were net buyers of $1.54 billion in the February-April period. Dealers said they were worried by the fund selling numbers as it could mean the market was headed lower.

SEBI changes May 8 FII figures

MUMBAI: Markets regulator on Thursday revised its foreign fund investment data for May 8, saying net selling on that day was less than half the amount reported earlier, but it failed to revive the market. The Securities and Exchange Board of India (SEBI) website www.sebi.gov.in showed net selling on Monday, May 8, at $ 43.3 million instead of $ 101.8 million reported earlier.

SEBI officials said the change was made because one custodian had given wrong data. "Some custodian reported the numbers wrong, but the damage has already been done. We have asked them for an explanation and will decide what to do after that comes," officials said, but declined to name the custodian. The incorrect SEBI figures showing foreign funds net sales of over $100 million had also affected sentiment in the stock market. The main BSE Sensex fell by 2.62 per cent on Wednesday and at mid-session on Thursday it was over three per cent lower.