Markets crack amid global rout, Sensex sheds 700pts

The markets plunged over 4% amid sell-off in global equities after the Federal Reserve steered away from announcing quantitative easing three. The Nifty plunged 210 points, at 4,923 and the Sensex declined 704 points, at 16,361.

The Nifty and the Sensex clocked its biggest point fall since July 2009.

Markets opened in red this morning after the Federal Reserve and the International Monetary Fund revived recession fears, causing flight to safety. The Nifty slipped below the 5,020 short term support and touched a low of 4,908 during the last leg of the trade. Steep cuts were seen across the Asian and European bourses on Thursday. The rupee also dropped to the 25-month low of Rs 49.01 per dollar due to capitulation across the board.

In Asia, Hong Kong’s Hang Seng index tumbled to two year lows, down 5%, China’s Shanghai Composite declined 3% and Japan’s Nikkei Stock Average slipped over 2%. Chinese manufacturing index released by HSBC Holding Plc and Markit Economics contracted to 49.4 in August from 49.9 levels in July, down for the third consecutive month. In Europe the CAC, DAX and FTSE tumbled over 4% each.

On Wednesday, the Federal Reserve launched a new package of measure to support the limping economy which was dubbed as ‘Operation

Twist’, where the Fed would buy long term bonds and sell short term bonds worth $400 billion. However, market participants did not cheer the Fed’s latest efforts. Moreover Fed’s statement that the economy faced “significant downside risks” renewed fears of a double dip recession.
Back in India markets shrugged of the weekly food inflation data. Whole Sale Price Index for the week ended September 10 slipped to 8.84%, at seven week low as wheat prices fell.

After the Federal Reserve meeting outcome, all eyes are now on the Euro-zone. Amit Chheda, Head of Equities from Inventure Growth and Securities said, “Unless a comprehensive bail-out is not acted upon, we could see high risks to European banks holding euro-assets, which could lead to a domino effect in other countries as well.”

The Nifty has been trading in the range of 4,900-5,180 in the past month, technical analysts expect Nifty to fall to 4,830 in the near term after it has broken short term support of 5,020.

All the components on the Sensex ended in the red. Reliance Industries (down 6%), ICICI Bank (down 4%) and HDFC (down 4.4%) were the top losers on the Sensex. The three heavyweights dragged the Sensex down by almost 200 points.

All the sectoral indices also closed in the negative, BSE Realty and Metal indices were the worst hit, down over 5% and 4% each. Metal shares lost sheen on concerns that the global growth slowdown may dampen demand. Sterlite Industries and JSW Steel fell almost 7% each, and Hindalco slipped around 5%.

From the realty space, HDIL plunged over 8%, DLF and and Indiabulls Real Estate declined over 7% each.

From the broader markets, the midcap and the smallcap indices fell over 3% each.

The market breadth was extremely negative, 2,235 stocks declined for only 606 stocks which advanced.