The Hindu Business Line : Global meltdown, Infosys sink Sensex by 219 points

While the Indian exchanges were closed on Thursday, global markets fell by an average of 1.5 per cent. Technology bellwether Infosys also announced its results for the quarter on Thursday, with a flat outlook on growth for the next quarter. Markets went into trade on Friday with these two negative developments deciding the sentiment. But the indices' free fall left dealers gasping.

Overall, the Sensex lost 219.58 points to erode 3.39 per cent of its value, and closed at 6248.34. This is the biggest drop in the Sensex since May 28, 2004, when the index shed 223.16 points. The Nifty shrank by 3.14 per cent and closed at 1956.30, registering a 69.15-point loss.

The tech pack, led by Infosys, bore the worst of the selling pressure. Infosys Technologies lost 4.56 per cent to close at Rs 1,956.60. Also affected were Wipro, which lost 6 per cent to close at Rs 605.35, and Satyam Computer, which registered a loss of 4.31 per cent and ended trade at Rs 382.75.

Fuelled by concerns about a slowdown in China and the US, commodity prices have been a concern. Metal stocks had a meltdown on Friday, with the BSE Metal losing 4.67 per cent. Essar Steel, SAIL, Sesa Goa, Sterlite all ended with losses of over 5 per cent.

Even though the market view largely is that Friday was an "overreaction," analysts are reluctant to predict that the market's bottom has been seen. "We did not expect the magnitude of Friday's fall, it is clearly an over reaction to Infosys. However, market movement on Friday, taken along with the volumes traded definitely, is an indicator of weakness. Our view is that frontline stocks have now become attractive. There are doubts about the commodity cycle; this is also an opportunity so long as buying is concentrated to frontline scrips," said Mr Amitabh Chakraborty, Vice-President and Head Research, Kotak Securities.

The Nasdaq closed at its lowest in five months on Thursday. Early trading on Friday indicated continued weakness in the US markets. Most Asian and other emerging markets closed weaker by 1-1.5 per cent on Friday.

"The results season so far has been fairly good, though the Infosys guidance was not very pleasant. Markets may be in for another 100-point correction, but after that it should hold up," said Mr N. Sethuram, Chief Investment Officer, SBI Mutual Fund.

Market participants are edgy going into trade on Monday. Concerns about volatility are made worse because of the bank holiday on Monday. "If the US and Asian markets continue to be weak, our bourses will open negative. Then, if there are some margin calls and triggers, things could take a turn for the worse because the banks are not working," said Mr Chakraborty.

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