Markets in free fall, Sensex tests 16,000

Equity benchmark indices lost further ground on Friday to register their fourth straight weekly loss — the longest losing streak since the collapse of Lehman Brothers in 2008. While the negative news flow on the global front is already weighing on investor sentiment, fear of a domestic slowdown due to rising interest rates is acting as a catalyst, say market experts.

While the 30-share Sensex fell below the 16,000-mark for the first time in nearly 15 months, the broader Nifty closed below the 4,900-mark. The benchmark Sensex finally ended the day at 16,141.67, down 328 points or 1.99 per cent. Nearly 150 stocks on the Bombay Stock Exchange (BSE) touched their all-time lows on Friday. The Nifty settled at 4,845.65, losing 98.50 points or 1.99 per cent. The stock market fall has wiped off more than Rs 2 lakh crore of investor wealth in just two days.

All the leading Asian indices ended the day in the red, with the Hang Seng shedding a massive 616 points or 3.08 per cent. While the Nikkei was down 2.51 per cent or 225 points, Taiwan Weighted lost 3.57 per cent or 272 points. Europe also saw all its equity indices post fresh losses on account of worries about a banking crisis in the euro zone as some lenders in the region faced a short-term funding crunch. The FTSE 100 lost nearly two per cent while Germany’s DAX was down over three per cent.

Major US indices swung between positive and negative after the Friday opening, reflecting the volatility that has rocked markets in the past weeks. The Dow Jones industrial average was down 8.47 points, or 0.08 per cent, at 10,982.11. The Standard & Poor's 500 Index was up 1.86 points, or 0.16 per cent, at 1,142.51.

BANKING SHARES LOSE SHEEN
The banking sector has borne the maximum brunt in the recent past, with investors, both institutional and domestic, shunning it. In the past week, the BSE Bankex has been the worst performer among all sectoral indices, shedding 7.51 per cent. This is nearly double that of the Sensex, which lost 4.14 per cent in the past week. “There are no default concerns (related to Indian banks) per se, but the fear of collapse of some European banks is making institutional investors pare their positions in the sector,” said a banking analyst with a domestic brokerage. “Europe is still deliberating on re-capitalisation plans and the absence of a concrete decision is making investors wary,” he said.

Credit Suisse, incidentally, has cut its target price for State Bank of India (SBI) to Rs 2,180 from Rs 2,483.07. It has maintained its “neutral” rating on the stock as it expects profitability to continue to be under pressure. Sector heavyweights such as ICICI Bank and Axis Bank have registered double-digit losses in the last one week. YES Bank has been the worst performer among the larger banks, with the share losing 12.52 per cent to close at Rs 262.45 on Friday. Even IDBI Bank has lost 10.17 per cent in the past week. SBI has lost seven per cent in the past week.

IT FACES MORE DOWNGRADES
India’s three largest IT companies — Tata Consultancy, Infosys and Wipro — dragged the software services sector index down as much as 6.3 per cent to its lowest level since November 2009. Tata Consultancy slumped 3.5 per cent to Rs 928.95 and Wipro closed 2.4 per cent lower at Rs 320.35.

Brokerage BNP Paribas yesterday downgraded the sector to “deteriorating” from “neutral” on large cuts in earnings per share, citing macro weakness and likely recession. “Over the next few quarters, not only should Indian IT growth slow due to a higher base from continued headcount dependence, but weaker macro data should only worsen the situation,” BNP said in the note. This comes on the back of CLSA downgrading the sector recently.

Infosys was the top loser, ending down 5.5 per cent at "2,224.70, its lowest closing level in 21 months, on worries about a drop in outsourcing demand in a weak global economy. India's $76 billion software and services sector, which has already been reeling under competitive pressure and sluggish demand, counts US and Europe as its two biggest markets.

ONGC PIPS RIL BRIEFLY
Within days of losing its position as the country’s most valued company to state-run Coal India, billionaire Mukesh Ambani-led Reliance Industries (RIL) on Friday briefly slipped below another PSU major ONGC to the third position in the market valuation charts.

ONGC pipped RIL in late morning trade to emerge as the country’s second-most valued company with a slightly higher market valuation, but could not retain the lead for the entire day.