Markets melt on Europe, Korea concerns

Sensex tumbles 2.71%; Re touches 8-month low; Brent crude slips below $68.

Stock markets across Asia, Europe and America tumbled, currencies weakened, commodity prices fell and borrowing costs jumped to the highest level in several months on heightened fears over Europe's debt crisis and the impact of austerity measures on economic growth. What added to the negative sentiments were fears of a military conflict on the Korean peninsula.

In Tokyo, Nikkei 225 lost 3.06 per cent and Hong Kong’s Hang Seng was down by 3.47 per cent. In Europe, London’s FTSE 500 was trading 2.54 per cent lower at midnight India time. France’s CAC-40 was lower by 2.9 per cent and Germany’s DAX was down 2.3 per cent.

There was a similar mood on the US markets, where the Dow Jones Industrial Average had slipped 1.51 per cent by midnight India time. Two other main indices — S&P 500 was lower by 1.48 per cent and Nasdaq Composite Index was down by 1.63 per cent.

Brent crude oil slid below $68 a barrel for the first time since February. The Euro fell for a second day against the dollar, losing 1.5 per cent to $1.2189. The yield on the German bond declined to 2.56 per cent, the lowest in at least two decades.

Mirroring the global trend, the Bombay Stock Exchange's (BSE) benchmark index, the Sensex, tumbled by 447 points, or 2.71 per cent, to close at 16,022, the lowest close since February 10 when it had ended at 15,922.17. During the day, the 30-share index fell below the 16,000-mark to a low of 15,960.15.
 

TOP 5 SENSEX LOSERS
Companies	Close#	% Chg*
Reliance Comm	138.55	-6.32
Hindalco	137.70	-5.43
Tata Motors	673.70	-4.66
Sterlite Ind	607.80	-4.49
Tata Steel	478.65	-4.45
ONLY GAINER
Cipla	313.40	0.05
TOP 5 BSE SECTORAL LOSERS
Index	Close	% Chg*
Metal	13971.70	-5.10
Cons. Durables	4385.33	-4.45
Cap. Goods	13114.04	-3.09
Bankex	10065.89	-2.62
Oil & Gas	9585.33	-2.58
* Over Previous Close # in Rs

The National Stock Exchange’s (NSE) Nifty lost 137 points, or 2.78 per cent, to 4,806.75. The broader index fell below the 4,800 mark during intra-day trade.

“There is a fear psychosis due to the problems in Europe,” said Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services. “In the absence of buyers, a small amount of selling is pulling down the market.”

According to Oswal, the situation is scary for traders, but for long-term investors, this is a good time to buy.

“The Indian market should remain under pressure for the next couple of months. Liquidity and sentiment is affected by the global developments,” said Rashesh Shah, chairman and CEO of Edelweiss Capital.

The markets globally appeared worried after four Spanish banks said they will combine as regulators push lenders to merge with stronger partners and after the International Monetary Fund yesterday urged the European nation to take more steps to overhaul its financial institutions.

Trouble brewing in the Korean peninsula also rattled the markets. A Seoul-based defector group, the North Korea Intellectuals Solidarity group, said on its website that North Korea has put its military on alert. South Korea has accused North Korea of sinking one of its warships.

Amid the fears, Adrian Mowat, managing director and chief Asian and emerging market equity strategist at J P Morgan, said the Indian markets were close to bottoming out.

Dealers said foreign Institutional Investors (FIIs) were heavy sellers of Indian shares today. According data available with the stock exchanges, FIIs were net sellers to the tune of Rs 1,464 crore, while mutual funds were net buyers (Rs 406 crore). Since April 26, when Greece’s sovereign rating was downgraded by S&P, FIIs have withdrawn Rs 6,122 crore from the Indian markets.

The impact of the withdrawal is already visible on the exchange rate with the Indian currency falling 7.4 per cent against the US dollar over the past one month. Today, reflecting the trend in the stock markets, the rupee weakened by 1.53 per cent to close at 47.70 against the US currency. The currency had closed at 46.98 yesterday.