Mumbai: Indian stocks fell on Friday to their fourth weekly loss in a row, the longest losing streak since October 2008 in the wake of the collapse of US investment bank Lehman Brothers Holdings Inc., on concerns that the US economy is facing a double-dip recession and the European debt crisis may spread.
The bellwether 30-share index of BSE, the Sensex, lost 328.12 points, or 1.99%, to close at 16,141.67.
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The broad-based 50-stock Nifty of the National Stock Exchange (NSE) also lost 1.99%, or 98.50 points, to end the week at 4,845.65.
The Nifty briefly breached the psychologically important 4,800 level to touch an intra-day low of 4,796.10 points.
Investors rushed to sell stocks in the second half of the trading session after European markets opened sharply down and brokers asked clients to bring in more money to offset the decline in the value of shares held by them so as to maintain margins.
European shares saw the biggest two-day fall since 2008, while oil prices fell and gold rose, hitting $1,860 (Rs 84,816) an ounce (28.35g) for the first time.
“Margin calls are being triggered and there has been heavy selling in mid-cap stocks in the past few sessions,” said Dev Kapadia, head of institutional sales at Lalkar Securities.
The Sensex and the Nifty, which are down more than 21% in the year so far, are the biggest losers among major Asia-Pacific indices, and are in the grip of a so-called bear market. Yet, at these levels, charts do not show any respite for the markets though there may be a brief bounce-back rally next week, analysts say.
Friday’s loss dragged the Sensex down 23% from a 5 November peak.
“The 4,800 level that we saw on the Nifty today is not the bottom. The market might pull back from these levels and test 4,925-4,950 levels next week, but over some weeks, we may see 4,600-4,500 levels on the Nifty,” said Vijay L. Bhambwani, a technical analyst.
All globally exposed Indian companies will face issues in terms of earnings growth, Punita Kumar-Sinha, chief investment officer for Blackstone Asia Advisors Llc, said in an interview with Bloomberg UTV. There is a lot of panic-selling out there on the back of growth fears, she said.
Information technology (IT) stocks were the biggest losers among Indian stocks. The BSE-IT index, down 4.41%, topped the sectoral losers’ pack, mirroring investor aversion to companies that have higher revenue dependence on US and European economies. Infosys Ltd, India’s second largest software services provider, which gets 98% of its sales from overseas, tumbled to the lowest since November 2009.
BNP Paribas SA on Thursday downgraded the sector to “deteriorating” from “neutral” on large cuts in earnings per share, citing macro weakness and a likely recession.
Tata Motors Ltd, the biggest truck maker and owner of JaguarLand Rover, dropped to its lowest since May 2010.
“The market will continue to be in bearish trend and there is more downside left in the absence of a definite signal on how the European situation would be resolved,” said Anshu Kapoor, private wealth head at Edelweiss Global Wealth Management.
Adding to the list of outlook downgrades on the US economy, Citigroup cut its gross domestic product (GDP) growth estimate to 1.6% in 2011 from 1.7%, and lowered its forecast for 2012 to 2.1% from 2.7%.
JPMorgan said US GDP will grow 1% in the fourth quarter rather than the 2.5% previously forecast and 0.5% in the first quarter of 2012 instead of 1.5%.
“People are looking forward to what the Fed (the US Federal Reserve) will do in its next meeting and what (US President Barack) Obama says,” said Kapadia.
According to a Bloomberg report, Obama is expected to deliver a speech in early September in which he will propose a mix of tax cuts and infrastructure investment to boost the economy.
The S&P 500 rose 0.6% to 1,147.32 points at 10:20am in New York after slumping as much as 0.9% earlier. The Dow Jones Industrial Average gained 0.2% to 11,010.56.
“In such market conditions, most positive measures will not have much impact. There is little the Fed can do now. For the near term, we may be close to the end of the fall in domestic markets. Bounces may not be very sharp. One just needs to give time and let this phase pass,” said Deepak Jasani, head of retail research at HDFC Securities Ltd.
“We remain sceptical about a broad-based recovery in the Nifty until 16 September, when the central bank meets to decide interest rate policy,” Jigar Shah, senior vice-president and head of research at Kim Eng Securities India Pvt. Ltd, said in a note to clients on Friday. “Unless there is a pause in the central bank’s rate-tightening exercise, we expect the Nifty to go down further to 4,500, a two-year low.”
Foreign institutional investors (FIIs), the key drivers of the Indian equity market, sold shares worth a net Rs 902.61 crore on Friday, according to provisional data on the NSE website. Domestic institutional investors bought stocks worth a net Rs 423.25 crore.
Since January, FIIs have bought stocks worth $774.51 million, according capital market regulator Securities and Exchange Board of India.
Graphic by Sandeep Bhatnagar/Min
Bloomberg and Reuters contributed to this story.