Sensex crashes to five-month low

New Delhi: It's a scary market fall, albeit much anticipated. Indian stock markets crashed nearly 541 points in the first 30 minutes of trade, with Sensex falling down to a five-month low of 12,344.44. Nifty fell by 135.60 points to dip below the 3,600 mark at 3,591.15 points.

While, the reasons are largely global, it seems the Indian indices will remain in the tight grip of bears for sometime. High valuation of Indian market still remains a concern among the FIIs.

Chinese fall, some hard moves in budget 2007-08 like excise duty hike on cement, imposition of MAT on IT and ESOPs attracting Fringe Benefit Tax, Yen appreciation over dollar and a major fall in US markets led to heavy selling pressure on Indian stock markets.

Markets lost nearly 2400 points since the last two weeks as the FIIs were the major sellers globally as well as in the Indian market. The F&O segment too witnessed shorting in the Nifty and huge unwinding in momentum stocks.

Since the beginning of last week, Foreign Institutional Investors, FIIs, were the major sellers. On the Budget day, FIIs sold over Rs 1,644 crore worth of shares on the back of selling pressure across the globe and high price-to-earning ratio of Indian markets.

They sold shares worth Rs 3,081 crore in four days beginning Monday of last week. Data for Friday is not available. However, Mutual funds were the net buyers of Rs 831.53 crore.

From highs of over 14,700 on February 9, 2007 down to 12,400 on March 5, 2007, the Sensex has borne the brunt of negative global as well as domestic news.

Here's a wrap up of what went wrong where in this 2400 point fall over the last two weeks.

How it began:

While the Indian markets did not go through any major hiccups since they claimed their all-time highs in early February, what they did not know was that tougher times awaited them ahead.

On February 27, Asian market indices recorded a setback on the back of a 9% fall in the Shanghai and Shenzhen 300 Index indicating a overheated Chinese economy.

The declines were sparked by China's plan to crack down on illegal investments, which sent Chinese equities on their steepest slide in a decade. Emerging-market stocks tumbled the most since June after a plunge in Chinese equities reduced investors' appetite for riskier assets.

Russian stocks fell 3.3% from an all-time high. Turkey's stock index had its biggest decline since June. Brazil's Bovespa slid 6.6%, as did an index of Latin American shares that fell the most since the September 11, 2001, terrorist attacks in the US.

Markets further spooked: Budget adds to misery

On February 28, as the Indian markets woke up to dismal global news, the Sensex opened 600 point down, dampening market sentiment on the crucial Budget day.

A market which was already hungry for positive news, was further starved by the bland Budget which did not do much for India Inc. To make matters worse announcements like; hike in dividend distribution tax, MAT on IT companies, and duties on cement sector, further contributed to the mayhem.

The markets came out of the Budget another 200 points lower - the Sensex ending the day below 13000.

However, there has been sustained market fall ever since, which has brought the

Sensex in the range of 12,400 levels. All this fueled by news of a continued fall in the US markets and fears of recession, sell-off in Asian markets and Yen carry trade unwinding.

So the wounds which opened up on Friday, 2 March, have still not got the required medicine.

Mutual Fund and FII action: FIIs withdraw Rs 3,081 cr in 4 days

Action in the FII and MF markets has also been disappointing. FIIs have been major sellers globally as well as in the Indian market. The F&O segment too witnessed shorting in the Nifty and huge unwinding in momentum stocks.

Right from February 26, FIIs were net sellers to the tune of Rs 439 crore (Difference between gross purchase of Rs 2,798 crore and gross sales of Rs 3,237 crore). Mutual Funds also sold Rs 29 crore worth of shares on March 1, 2007, as per the Sebi data.

On the Budget day, FIIs sold over Rs 1,644 crore worth of shares on the back of selling pressure across the globe and high price-to-earning ratio of Indian markets. Thus, they sold shares worth Rs 3,081 crore in four days since Monday 26 February.

A fresh stocks plunge in Asia-Pacific markets on Monday morning dragged the stock markets to a five-month low of 12,344.44, down by 542 points during opening trade. Similarly, Nifty fell by 135.60 points to dip below the 3,600 mark at 3,591.15 points.

All Asian markets were quoted down 1 to 3 per cent this morning indicating a major jolt to the global economy.

The Bombay Stock Exchange (BSE) 30-share sensitive index (sensex) resumed trading sharply lower at 12,716.85 from last weekend's close of 12,886.13 and later touched a five-month low of 12,344.44 at 10.30 am.

The broader S&P CNX Nifty of the National Stock Exchange (NSE) also dived by 143.25 points to 3,583.50 from previous close of 3,726.75.

Market observers said Wall Street's continued weakness last week on concerns of US economic slowdown and melt down on

Asian markets dampened the trading sentiments here.

Funds sold frantically taking cues from weakening global markets. Brokers said Wall Street's continued weakness last week on concerns of US economic slowdown and melt down on Asian markets has dampened trading sentiments.

All the BSE-30 and NSE-50 shares were in the negative zone with steep falls in early trade. BSE Capital goods slipped 4 per cent. BSE Auto, IT and Bankex crashed over 3 per cent each.

BHEL and Maruti lost 5 per cent each with L&T, Nalco and Tata Power down over 4 per cent.

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