Mumbai: Indian equities opened 1.5-2% lower than Thursday’s close in the pre-opening call auction. Stocks across Asia continued to fall resembling the panic selling in the US markets overnight. Investors are concerned about a sovereign downgrade rating to the US, the debt crisis in Europe – Spanish bonds were received poorly, for instance -, and fears of a global economic slowdown. Overnight, the US markets fell by 4% in a chilling reminder of some days in the last financial crisis
Hang Seng 20913.6, -4.3%
Nikkei 9334.26, -3.36%
Strait Times Index 3004.6 -3.36%
This just might be the beginning as the brokerages are unsure whether the panic selling is over.
A Citigroup note says: “Big market plunges do not normally generate big rebounds near term. A study going back to 1962 shows that greater than 3% and 4% declines in the S&P 500 are unlikely to provide the kind of statistical evidence that would reinstate confidence for equity investors. Indeed, in the relative few periods where 4% or greater declines occurred, the data is not discouraging, but also not encouraging.”
The saving grace for India could be the fact that there is not much leverage in this market unlike in the West. But that might not prevent foreign institutional investors to pull out money in the flight to safety.