Economy fears grip Dalal Street

Key stock market indices tumbled on Friday, amid a global sell-off, as faltering economic growth at home and euro zone debt worries made investors risk-averse.

The BSE benchmark index, Sensex, lost 1.56 per cent, or 253.37 points, to close at 15,965.16, the worst since May 16. The 30-stock index fell 6.4 per cent last month, its worst May performance since 2006. At the National Stock Exchange (NSE), the 50-stock Nifty index dropped 1.68 per cent, or 82.65 points, to 4,841.60.

India VIX, which measures the cost of protection against losses in the Nifty Index, rose six per cent to 26.8, the highest reading since May 23, according to Bloomberg. Foreign institutional investors (FIIs) sold Indian shares worth Rs 220.38 crore today, provisional data on the BSE website showed.

 

The purchasing managers’ index, released by HSBC and Markit Economics on Friday, came in at 54.8 in May from 54.9 in April, indicating weak demand scenario after economic growth in the January-March quarter moderated to a nine-year low.

India’s dismal January-March quarter growth of 5.3 per cent has triggered economic downgrades from investment banks, with Morgan Stanley cutting 2012 gross domestic product growth forecast to 5.7 per cent from 6.3 per cent.

Major world markets fell on Friday as gloomy global economic outlook encouraged a flight from riskier assets and into government debt.

“Uncertainty in the euro zone is weighing on investor sentiment,” said Vikas Khemani, president and head of institutional equities, Edelweiss Financial Services. “Today’s drop in Indian market was in line with the weakness in most global markets. However, the fall was on large volumes, which is a matter of concern.”

Among the major losers on the 30-stock Sensex, were Tata Motors declining 3.73 per cent to Rs 224.50, Larsen and Toubro falling 3.22 per cent to Rs 1,134.50 and Reliance Industries sliding 3.16 per cent to Rs 683.70. Market breadth was weak on BSE with more than two declining stocks for one advancing.

“Sentiment is extremely weak at the moment and will continue to remain so unless there is some clarity from the euro zone,” said Manish Sonthalia, vice-president and fund manager, Motilal Oswal AMC. “Nobody is going to have a handle on things, at least, till the outcome of Greece elections.” Among the major sectoral losers on BSE, Consumer Goods index shed 2.99 per cent, while the power index dropped 2.49 per cent.