The Hindu Business Line : Sensex tumbles 523 points triggered by weak global cues

The US markets fell by around 3 per cent after the US based Institute of Supply Management’s index of non-manufacturing plummeted to 41.9 from 54.4 in December, indicating contraction in the services sector, which is the largest part of the US economy.

The fall to such levels has not been seen since the 2001 recession, renewing fears of an economic slump, said analysts. “Weaker service sector data and Standard & Poor’s downgrading of many US banks mean that there is increasing risk of US going into recession,” said Mr Puneet Nanda, Chief Investment Officer, ICICI Prudential Life Insurance. In India it is just a contagion effect of the fall in the global markets, he said.

Asian markets

However, the impact of these global developments on the Sensex and Nifty was the least among the Asian equity markets.

The other key Asian indices in Hong Kong, Japan and Singapore fell much more sharply, by 3.5 to 5.40 per cent.

“China, Korea, and Japan, which are heavily dependent on exports to the US, have been impacted. It’s a ripple effect in the short-term in India too, but in the long-term fundamentals will prevail,” said Mr Raamdeo Agrawal, Director and Co-Founder, Motilal Oswal Financial Services.

The domestic impact was maximum among the large-cap stocks that had exposure to global risks. Stocks well entrenched in the domestic market as well as those that had expectations from the forthcoming Budget bucked the trend.

Among the BSE 500 companies, 377 closed in the red against 120 in the green.

“It’s just panic selling because the Asian and US markets were down; in fact, not much selling was seen at lower levels and the FIIs and domestic institutions have bought,” said Mr Jignesh Desai, Head, Institutional Sales, SBICAP Securities.

Still, the FIIs were net sellers for Rs 485.94 crore, showed the provisional composite BSE and NSE data.

Domestic institutional investors were net buyers for Rs 357.32 crore.

The Sensex opened lower by 416 points in line with the fall in the Asian markets and within minutes fell to day’s low of 17,936.

It recovered more than 200 points during the day to close at 18,139, lower by 523 points from Tuesday’s close. The Nifty closed down by 161 points, at 5,322.

All the sectoral indices closed in the red. IT stocks, most vulnerable to the US economy, topped the Sensex losers; the majors dipped by 5 to 7 per cent.

The metal, auto and oil & gas sectors lost heavily too.