Spooked by global jitters,Sensex & rupee in free fall

With foreign investors pulling out Rs 1,300 crore,the 30-share BSE Sensex fell 4.13 per cent,or 704 points to 16,361.15,its lowest close in nearly a month and the biggest one-day percentage fall since July 6,2009.

Total market capitalisation,or investors’ wealth,plunged by Rs 2,15,000 crore to Rs 60.26 lakh crore in a day. Retail investors lost Rs 93,267 crore on the free-float basis (actual stake held by public in companies).

World stocks as measured by MSCI fell more than 2.4 per cent to a new year’s low,making for a 14 per cent year-to-date loss. Tokyo fell 2.07 per cent,or 180.90 points,to 8,560.26,Seoul dived 2.90 per cent to 1,800.55 and Sydney plunged 2.63 per cent to 3,964.9,its lowest in more than two years. Hong Kong tumbled 4.85 per cent to 17,911.95,its lowest finish since July 2009,while Shanghai ended 2.78 per cent lower at 2,443.06.

Creating nervousness in markets,the Fed set the ball rolling on Wednesday when it launched “Operation Twist,” a plan to lower borrowing costs by selling or not renewing short-term debt in favor of longer bonds. However,in announcing the new plan,the Fed said recovery was still years away and warned of “significant downside risks to the economic outlook”,with the economy struggling with slow growth,high unemployment and a depressed housing market.

What added to the nervousness is the plunge in the rupee value by 2.5 per cent to 49.57 per dollar,its lowest level in more than 28 months,despite the RBI’s intervention. Finance Minister Pranab Mukherjee,who is in the US,said the Reserve Bank will intervene in the foreign exchange market “as and when the situation warrants”. However,“right now,there is no such situation,” he said after meeting leading Indian industrialists at an investment forum in New York.

“For India,the biggest negative was the slump in the rupee below 49 per dollar. One has to see how the FIIs behave from here on and what steps policymakers take to stem the slide in the rupee,” said Amar Ambani,Head of Research,IIFL.

Sanjeev Zarbade,Vice President,Kotak Securities,said,“The Fed said that significant risks remain in place for the global economy. The Fed also decided against a QE3. This spooked the US markets,which closed sharply lower yesterday. Given the negative global cues emerging from the US and Asian market,the Indian markets opened lower and continued losing ground. The selloff was further exacerbated by the weak opening of the European markets. There was selling pressure across most sectors.”

Dealers said domestic factors like rising interest rates,inflation and 2G scam issues also added to the bearish sentiment. Among the top losers,real estate shares fell 5.67 per cent,metals 4.34 per cent,oil & gas 4.19 per cent,banks 3.98 per cent,auto 3.86 per cent and IT 3.86 per cent. Reliance fell 6.16 per cent and Infosys 3.28 per cent. Analysts said in the near-term,emerging markets around the world are looking towards global cues for direction,but global news flow has mostly been negative,with no immediate respite in sight.