Sensex falls to 11-month low, ICE still melting

Sensex falls to 11-month low, ICE still melting
ENS ECOMONIC BUREAU

MUMBAI, MAY 12: The stock market crisis deepened with shares sliding across the board to close at an 11-month low as investors worried over volatility dumped shares in thin trade. The benchmark Bombay Stock Exchange Sensex lost another 144.22 points, or 3.39 per cent, at 4,107.14 points after touching an intra-day low in calendar 2000 of 4,102.7.

With this fall, Sensex has lost 586.74 points during the current week. The index has now lost 11.8 per cent in May alone. The 50-share broader National Stock Exchange Nifty Index lost 21.75 points to 1,281.80 from the last level of 1304.55. The Sensex closing level has not been seen since June 16, 1999 when it finished at 4,021.40 points.

The session commenced on a cautious note as operators were not interested in creating any fresh positions in view of the end of the settlement but stocks started declining after players indulged in squaring-up their positions particularly in information technology, telecom and media companies. ICE stocks, led by Zee Telefilms, continued their free fall on heavy selling.

Operators said markets are likely to be weak until uncertainty clears over a possible interest rate hike by the United States Federal Reserve. Though a 50 basis points is already being talked about, investors are unwilling to take chances. Leading losers include Zee Telefilms down 12 per cent at Rs 480.80, Infosys Technologies down five per cent at Rs 6,830 and Satyam Computer Services down 2.76 per cent at Rs 2,737.05.

Marketmen said reports that FIIs have been net sellers on the Indian bourses and sold to the extent of Rs 356.80 during the past three trading sessions was also a major factor behind the slide in stock prices. They said weakening of Indian rupee at the forex market which quoted lower at 43.92 against yesterday's closing of 43.87 to a US dollar further dampened the sentiment.

``Stocks of IT companies were badly hit and hit another downward circuit-filter of price bands,'' said a BSE broker adding that ``I don't see any significant recovery in the near future. Many investors have suffered huge losses because of the sharp erosion in values in the recent past.'' If the US Fed hikes interest rates, FIIs are likely to step up their selling and exit from India.

On the other hand, many Asian markets rallied on Friday following the hsrap overnight gains on Nasdaq and the New York Stock Exchange. However, investors were cautious ahead of a widely-anticipated rise in key US interest rates next week. "The sentiment is not too positive and people are quite cautious ahead of the Federal Open Market Committee meeting on Tuesday," said Alex Wong, research manager at OSK Securities in Hong Kong.

Tokyo's Nikkei average finished up 2.82 per cent at 17,357.86 after four straight losing sessions. Australia's S&P/ASX 200 index also staged a rebound following recent losses, closing 1.28 percent up at 3,034.8. Hong Kong stocks were firmer following a losing streak since May 3. The Hang Seng Index was up 1.50 per cent at 14,709.72.

Wall Street rallied overnight after a government report showed US retail sales fell 0.2 per cent in April -- the first decline in almost two years.The closely watched data might ease pressure on the Fed to keep tightening interest rates in a bid to cool the economy. Before the data, analysts forecast the Fed would hike US rates by 50 to 75 basis points, even after the expected increase in rates next week.

The Dow Jones Industrial Average rose 1.72 per cent to end at 10,545.97 on Thursday, while the technology heavy Nasdaq rose 3.39 per cent to 3,499.58 after enduring three consecutive sessions of steep losses.