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Sensex drops 3% on US economic worries

Sensex drops 3% on US economic worries
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First Published: Tue, Sep 23 2008. 05 02 PM IST
Updated: Tue, Sep 23 2008. 05 02 PM IST
Bangalore: Indian shares fell 3% on Tuesday in their biggest drop in a week, on concern the US government’s $700 billion bailout package to rescue the ailing financial sector may not be enough to revive the US economy.
“There is complete lack of liquidity in the market as new funds are not coming in and those that are there are withdrawing money,” said Neeraj Dewan, director at Quantum Securities in New Delhi. Major European markets also dropped and US stock futures pointed to a lower start on Wall Street, as investors awaited details of the bailout plan from US Treasury Secretary Henry Paulson’s testimony to the Senate Banking Committee.
India’s No. 2 software services exporter Infosys Technologies led the fall, losing 5.2% to Rs1,543.35, on growing worries about outsourcing prospects amid a global financial turmoil.
Traders said high oil prices also stoked worries about inflation in Asia’s third-largest economy, which imports about 70% of its oil.
“Investors should stay on the sidelines as the volatility is expected to continue for some time and the market will basically move depending on the news flow from overseas markets,” Dewan said.
The main 30-share BSE index ended down 3.03%, or 424.65 points, at 13,570.31, after having fallen as much as 3.2%. It had earlier pared its losses to as much as 0.1% on short covering ahead of futures expiry on Thursday.
All but two of the index’s components lost ground.
The BSE index has lost 33% so far this year on foreign fund withdrawals of about $9 billion.
No. 2 lender ICICI Bank fell 5.5% to Rs599.70, its biggest single-day fall in a week, on concerns high crude prices will diminish the possibility of monetary policy easing in the near term.
Top lender State Bank of India lost 4.1% to Rs1,502.75 rupees and smaller private rival HDFC Bank closed 4.6% lower at Rs1,237.70. The banking sector index ended down 4.2%.
Crude November futures eased to around $108 a barrel after climbing sharply on Monday, when the October contract posted a historic one-day jump of nearly 16 percent to over $120 on expiry.
High energy prices have been a key factor behind inflation that was running at 12.14 % in early September and the central bank tightening its monetary policy aggressively.
“If the inflation in India doesn’t come down because of the high oil prices, then the chances of interest rates coming down also becomes slimmer,” said Amitabh Chakraborty, president of equities at Religare Securities.
Top outsourcers such as Tata Consultancy Services and Satyam Computer Services shed nearly 6% each to Rs720.75 and Rs331.65 respectively. The two firms get bulk of their revenue from banks and financial institutions.
In the broader market, 1,828 losers overwhelmed 761 gainers on volume of 232 million shares.
The 50-share NSE index fell 2.28% to 4,126.90.
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First Published: Tue, Sep 23 2008. 05 02 PM IST
More Topics: Markets | Stocks | Sensex | Nifty | BSE |