Crude shock for markets

Sensex slumps sharpest in 15 months amid record turnover.

Foreign investors dumped stocks on Thursday, after crude oil prices surged to their highest level since August 2008, threatening further inflationary pressure and a rise in import bill for India, which depends on overseas supplies for more than two-thirds of its oil requirements.

The rise in crude oil prices could act as a major spoilsport for the Indian markets and trigger outflows from overseas investors, experts said.

FIIs, which pumped in close to $30 billion in the Indian stock markets, have withdrawn $1.45 billion this year so far. On Thursday, they sold shares worth Rs 2,702.22 crore, while domestic institutional investors bought shares worth Rs 1,029.92 crore, as per provisional Bombay Stock Exchange (BSE) data. FII selling on Thursday was the highest since January 28, 2010, according to BS Research Bureau.

The BSE’s benchmark index, Sensex, tumbled 3 per cent, or 545.92 points, to 17,632.41. This was the highest fall for the 30-stock index in terms of percentage points since November 3, 2009. At the National Stock Exchange (NSE), the 50-stock Nifty index slipped 3.21 per cent, or 174.65 points, to 5,262.70.(Click for graph)

The combined turnover at the BSE and NSE was a record Rs 2,99,221 crore.

“Rise in crude oil prices is spooking the markets. There is also a crisis of confidence due to the ongoing 2G investigation,” said UR Bhat, managing director at Dalton Capital Advisors (India). “The impact of FII outflows is dramatic. There is nobody to stand and counter that (among domestic investors),” he added.

Brent crude futures for April jumped $8.54 per barrel to $119.79 on Thursday on concerns that unrest in Libya could spread to other major oil producers in West Asia, including Saudi Arabia. They were trading at $115.31 at 6:45 IST.

Food inflation for the week ended February 12 rose to 11.49 per cent, reaffirming concerns among investors over high inflation in India.

Among the major losers in Sensex, Tata Motors fell 7.54 per cent to Rs 1,058.25, while Jaiprakash Associates declined 6.20 per cent to Rs 78.70 per cent.

Market breadth was negative with more than three stocks declining for every advancing stock on the BSE. There was a panic selling in the market on Thursday, the last day for expiry of derivative contracts.

“There was margin pressure today and stop losses of market players were triggered,” said Deven Choksey, managing director of Mumbai-based K R Choksey Shares and Securities. “The derivative rollover in markets is extremely poor, as FIIs are not able to carry forward their positions due to subdued market depth,” he added.

The rollover in Nifty futures positions from the February series to the March series stood at 63 per cent. Nifty futures rollovers have seen a steady decline since the October 2010 series, when they were 76 per cent.

Earlier, major Asian markets, excluding China, ended with losses due to a rise in crude oil prices. Japan’s Nikkei 225 fell 1.19 per cent, Hong Kong’s Hang Seng declined 1.34 per cent and South Korea’s Kospi dropped 0.60 per cent. Bucking the trend, China’s Shanghai Composite rose 0.56 per cent.