Sensex falls to 3-month low on US job data

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Dips below 16K; Reliance hits 52-week low.

Our Bureau

Mumbai, Feb. 5The poor US job data published on Thursday had its ripple effect thousands of miles away here in India where it sentstocks plummeting to a three-month low on Friday.

The benchmark Sensex sank below the 16,000-mark for the first time since November2009, crushing the optimism that had set in during early Januarythis year when it was at its 12-month high of 17,790. From then to its Fridayclose, the index has fallen more than 11 per cent.

On Friday, it dipped 434 points or 2.63 per cent to close at 15,790.93. The Sensexopened at 16,222 and fell almost continuously right to the end of trade. The Nifty fell 2.61per cent to 4,718.65. Reliance Industries, the heaviest Sensex stock by weightage, touched its 52-week low of Rs 975 a share.

All the major global equity markets were trading in the red on Friday. "The US job dataled to a powerful pull-back in the markets there last night," said Mr Saurabh Mukherjea,Equity Head of Noble group (India), the India arm of the British investment bank.The Dow was down 2.61 per cent and the Nasdaq 2.99 per cent on Thursday.It was the FIIs again thatbrought the markets downhere, their net sales on Fridayat Rs 1,726.7 crore, taking theirFebruary net sales up to Rs2,435.7 crore."With added worries comingin from Europe, FIIs aregetting out of risky (overvalued)markets such as India,"explained Mr JagannadhamThunuguntla, Head of Equityat SMC Capitals.Most of the selling on Fridaytook place in the metal, realtyand auto stocks. Metal stockswere sold because of the dollarrise and the fall in gold. Evensugar stocks were shed on reportsof increased productionin Maharashtra.UNWINDING $ CARRY TRADEThere is quite a bit of unwindingof dollar carry trades (borrowingin dollar at low interestrates and investing in elsewherein high yield markets),said Mr Thunuguntla. "This isleading to more selling by FIIs,"he added.As some investors sold, moreand more joined the herd. "Investorsneed some sort of a cueto book profits as a lot of themare sitting on a lot of gains dueto the rally seen last year," saidMr Ashu Madan, President-Equity Broking at ReligareSecurities.Domestic institutions werenet buyers for Rs 1,168.98 croreon Friday. Retail investorswere net sellers for Rs 9.73crore on the BSE. Mr Thunuguntlasaid that retail investorshave remained very wary of themarkets as they burnt their fingersvery badly in the crash of2008.Mr Ravi B, a retail investorfrom Bangalore, reflects thiswariness. He said it was becomingincreasingly difficultfor him to predict which waythe markets will go. "To be onthe safer side I did sell a few ofmy shares to book profits beforeit is too late," he added.All the major sectoral indiceson the BSE ended the day in thered, with the realty, metal andPSU indices leading the fall. Onthe BSE, 81.6 per cent of thescrips (2368) fell, whereas only487 advanced.Tata Power was the solegainer among the Sensexscrips; it was up marginally by0.8 per cent. Hindalco, TataSteel, ONGC, Jai Prakash Associatesand Mahindra and Mahindrawere among the biggestlosers of the day among thebenchmark stocks.It was not just the equitymarkets which fell on Friday,the commodities markets tootook a beating. One of the reasonsbeing again, the US job dataas America is one of thebiggest consumers of commodities,said the head of a brokingfirm.According to data on Bloomberg,crude oil was down 0.6per cent at $72.7 a barrel andgold was down 1.01 per cent at$1052.3 per ounce. "Investorsare not just booking profits inthe equity markets but acrossasset classes," said Mr Madan.

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(This article was published in the Business Line print edition dated February 6, 2010)
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