Sensex down 500 points in morning trades

The markets continued to trade lower as investors fleed out of equities to safer assets on escalating fears of double dip recession in west, after S&P downgraded the US credit rating.

The Nifty was down 138 points, at 5,072 and the BSE Benchmark Sensex declined 486 points, at 16,820 in the morning session.

Lossed mounted across Asia as well, Japan’s Nikkei Stock Average slipped 2%, Hong Kong’s Hang Seng lost 4.1% and China’s Shanghai Composite was off 4%.

Back in India BSE Metal and realty were the top sectoral losers, down almost 5% each.

-------------------------Updated at 09:40 hours

The markets have started from where they left on Friday, the Sensex opened with a downward gap of almost 400 points owing to selling pressure across Asia after S&P downgraded United States credit rating to AA+ from AAA, first time in 70 years, intensifying risk of double dip recession in the West.

The Nifty plunged 130 points, to 5,080 and the BSE Benchmark Sensex declined 399 points, at 16,908. Markets were down for the fifth consecutive session, clocking the worst opening since October 2008.

The US credit rating cut and the sell-off in Italian and Spanish bonds continued to weigh on the markets. Japan’s Nikkei Stock Average slipped 1.3%, Hong Kong’s Hang Seng lost 3.7% and China’s Shanghai Composite was off 3.6%.

Back in India, analysts are concerned that there may be a reversal of foreign institutional investor flows which have been driving the markets in the past few years. There are immediate fears for the export related sectors such as IT which may get affected by cuts in client spending. However, a sustained dip in commodities such as crude and metals would be help ease inflation fears.

Over the weekend, Finance Minister allayed growth concerns, Pranab Mukherjee said, India will be able to sustain growth and fight off negative sentiments that are spreading across the globe as the fundamentals were strong.

Also Group of seven nations met on Sunday and discussed how to avert a collapse in global confidence. The G7 members decided to inject liquidity and take necessary measures in the wake of volatile currency moves.

Among the sectoral indices, BSE IT index was battered further, it was down 4.7% in the Monday morning session on concerns that growth slowdown in the west may dent profits of IT companies if clients resort to spending cuts. TCS slumped 5.2%, Infosys and Wipro plunged over 4%.

Metal shares continued to lose sheen for the second day in a row on anticipation of reduced demand in case of a global growth slowdown. The BSE Metal index declined 3.4%; Tata Steel was off 4.3%, Sesa Goa fell 4% and SAIL lost 3%.

From the broader markets, the midcap and the smallcap indices were down 3% each.

All the components on the Sensex were trading in the red. Top losers on the Sensex were Tata Motors, down 5.2%, DLF was off 3.5% and JP Associates lost 3.5%.

Market breadth was negative, 1,695 stocks declined for 181 stocks which advanced on the BSE.