'Manic Monday' of January 2008 revisited?

Is the "Manic Monday" of Jan 21, 2008, as that eventful day is now called, playing out in Indian stock markets once again? That's the question that punters are pondering over as a key index in India dived 1,625 points -- the steepest ever in absolute terms.

On that eventful day some 92 months ago, the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) closed 1,408.35 points, or 7.4 percent, lower to log, what was till the latest Monday, the steepest closing fall ever in point-terms. The reasons were mainly external.

As if on cue, as trading drew to a close on Monday, the Sensex shed 1624.51 points, or 5.94 percent, mainly on account of global cues, especially the mayhem in the Chinese markets due to worries that the economy there could be slowing faster than what was thought of.

In terms of percentage, however, the loss of nearly 6 percent on the latest Monday was around a half of the steepest-ever fall of 11.13 percent which the Sensex logged on May 17, 2004, data available with the Mumbai bourse showed.

"That time in January 2008 it was a continuous fall. Week-to-week basis, equities were falling," said Vinod Nair, head of fundamental research, Geojit BNP Paribas Financial Services. "This time, the markets were showing resilience. As a result, it has been hit the hardest towards the end."

On both occasions, the finance ministry had sought to talk the market up.

"Today's market fall reflects the continuing uncertainties in the global economy and not any change in the fundamentals of the Indian economy," the ministry had said in a statement on Jan 21, 2008, asking investors to take "responsible" decisions.

The remarks made on the latest Monday appeared no different.

"Factors responsible for the markets fall are entirely external. There isn't a single domestic factor," said Finance Minister Arun Jaitley at a conference here. "The turbulence is transient and temporary in nature. Markets will settle down once the turbulence is over."

What is also of concern is that the market in January 2008 did not actually react positively to the finance ministry's statement. The very next day, that is on Jan 21, in less than a minute into the trading session the lower circuit had been breached.

The index had shed as much as 2,273 points, intra day. It required another dose of statements from the finance ministry and the policy-makers to soothe the nerves -- and the Sensex finally made a handsome gain of of nearly 1,400 points thereafter to end around 875 points lower.

Apart from the latest Monday only two previous sessions have seen the steepest closing fall of over 1,000 points on a single day -- on Jan 21, 2008 and on Oct 24, 2008.

According to analysts, even as the triggers on the two "Manic Mondays" were different -- the US developments in 2008 and the Chinese crash now -- there remained some inherent worries. This, they said, was the added fear of the currency war that has taken the rupee to a two-year low.