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Sensex dips over 700 pts on grim outlook for US economy

Sensex dips over 700 pts on grim outlook for US economy
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First Published: Thu, Sep 22 2011. 03 53 PM IST
Updated: Thu, Sep 22 2011. 03 53 PM IST
Mumbai: The 30-share BSE benchmark Sensex nosedived by over 700 points during mid-session on Thursday on panic selling across sectors, on grim economic warning by the US Fed over the American economy amid worries about global slowdown.
After a weak opening, Sensex meltdown to over 555 points to 16,509.49 at 2:15pm, as stocks led by realty, metal and refinery segment suffered losses of up to 4%.
The broad-based National Stock Exchange index Nifty plunged by 161.25 points to below the 5,000mark at 4,972.
IT stocks also plunged amid the rupee falling to over two-year low against the US currency. IT companies get over 80 per cent of their revenue from the US and Europe markets.
Although the weak currency boosts their earnings in rupee terms, a slowdown in exporting markets increases chances of big hit in business prospects.
Brokers said the selling pressure gathered momentum as the Federal Reserve cited risks to the US economy, amid ongoing debt troubles in the euro zone nations and continuing depreciation of the rupee that makes imports costlier.
Banks, export-driven software services companies such as Infosys and truck and car maker Tata Motors were among the big losers.
Gajendra Nagpal, chief executive of Unicon Financial Intermediaries, said investor confidence was dented after US stocks suffered their worst drop in a month on Fed comments there were “significant downside risks” to the economy even as it took another stab at boosting growth.
“If Europe also falls, then we might see further selling,” he said.
Videocon Industries bucked the trend and rose as much as 3% after the energy unit of the consumer electronics maker announced a discovery of oil and gas in Brazil.
Leading lender State Bank of India and rival ICICI Bank fell more than 2% each, while Tata Motors shed 3.8% and DLF dropped 3.4%.
K. K. Mital, head of portfolio management at Globe Capital, said a combination of factors from delays in government decision making to rising domestic interest rates were weighing on the market.
“There are concerns on slowing of policies... and a continuous hawkish view on inflation and interest rates, which may have an impact on corporate earnings,” he said.
The Reserve Bank of India had raised rates last week for the 12th time in 18 months and warned fighting stubbornly high inflation remained its priority even as economic growth was slowing.
Top software services exporter Tata Consultancy Services fell 1.5% and Infosys was down 1.1%, after rising over the past 3 days on the back of a sharp slide in the rupee.
The MSCI’s measure of Asian markets other than Japan was down 4.4%, while Japan’s Nikkei fell 2%.
Stocks on the move
• Astral Poly Technik rose as much as 20% after the company said it was in preliminary talks with US based Lubrizol Corp to set up a chlorinated poly vinyl chloride making plant.
• Pantaloon Retail fell more than 4%, erasing the gains made in the previous session on a report the Future Group, which owns the retailer, was in talks with Japan’s Lawson to sell a 49% stake in its food sourcing and manufacturing operations.
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First Published: Thu, Sep 22 2011. 03 53 PM IST
More Topics: Markets update | Sensex | BSE | NSE | Nifty |