India’s bellwether equity index, the Sensex, was one of the worst hit among key Asian indices on Thursday as investors across markets rushed to sell stocks after Carlyle Capital Corp. Ltd (CCC), an arm of US private equity giant Carlyle Group, admitted that it has defaulted on $16.6 billion (Rs67,064 crore) of debt and is likely to be liquidated.
The Bombay Stock Exchange’s (BSE) Sensex lost 770.63 points, or 4.78%, to close at 15,357.35, its lowest since 31 August, as the short bout of optimism after Tuesday’s cash injections by five central banks, including the $200 billion boost from the US Federal Reserve, melted on fresh fears.
At the National Stock Exchange (NSE), the broader Nifty index lost more than 5% to close at 4,623.60—its lowest since 18 September.
The Sensex is now down 27.5% this year, from its all-time high achieved on 10 January, shaving off some Rs20 trillion worth of investor wealth. The Nifty has dropped 27.2% from its peak this year.
“We are in the middle of a global liquidation,” said Rashesh Shah, founder chairman of publicly traded institutional brokerage Edelweiss Capital Ltd.
With both Sensex and Nifty at a new bottom, analysts see a further fall. “It is now likely to fall more,” said technical analysis expert Vijay L. Bhambwani, chief executive of brokerage Bhambwani Securities Pvt. Ltd.
The European markets opened down, with the UK’s benchmark FTSE 100 index losing more than 2%. In the US, the Dow Jones Industrial Average was trading at 12,024.93, down 85.31 points, at 8.30pm India time.
Among Asian markets, Hong Kong’s Hang Seng fell 4.8%. In China, the benchmark index fell 2.4% to a seven-month low on increased concerns of inflation. Some investors “fear (interest) rate hike in China”, said Patrick Liu, associate director of Hong Kong-based Cash Asset Management, an institutional wealth manager.
The Shanghai benchmark index has lost almost 20.3% this year, the second biggest in Asia after India, where the market has been in a correction mode since late January.
In Singapore, the equity index dropped 3.85%; Japan’s Nikkei was down 3.3%. Indices in South Korea, Australiaand Taiwan lost more than2% each.
According to Bloomberg data, foreign institutional investors (FIIs) had sold more than $3.4 billion worth of Indian stocks up to 11 March. On Thursday, these funds continued to sell; they had made a net investment of $17.2 billion in Indian equities in 2007, the highest in a year since the market opened doors for such investors. The provisional data on BSE indicates that FIIs “net sold” (after accounting for their purchases) Rs108.5 crore worth of Indian stocks in the cash market, while domestic institutions bought stocks worth Rs56.4 crore, net of sales. “Large quantum of FII investments in recent years through P-notes (participatory notes) had gone to realty and infrastructure stocks,” said a senior executive of a foreign brokerage, who did not wish to be named.
P-notes are offshore derivatives of Indian stocks issued by foreign brokerages in India, registered as FIIs. “FIIs, mainly the P-note holders, were big sellers in the real estate pack,” said Jignesh Desai, who heads the institutional clients business at SBI Capital Markets Ltd, the investment banking arm of India’s largest lender State Bank of India.
Realty stocks witnessed significant value-erosion on Thursday. The 14-stock realty index of BSE was down 11.5%, the steepest fall among all sectoral indices. The country’s largest realtor DLF Ltd was the worst hit and its stock plunged about 15%. Unitech Ltd, the second largest stock in the basket, dropped 9.7%.
DLF, at Rs606.75, is now trading at just around a 15.5% premium over its issue price; the stock was listed in Julylast year. However, not all real estate stocks are trading at a premium to their issue prices. For instance, Omaxe Ltd, Parsvnath Developers Ltd and Puravankara Projects Ltd are trading way below the price at which they were offered during their initial public offerings (IPO).
Omaxe, now trading at Rs205.4, was offered for Rs310 per share, while Parsvnath, which is now priced Rs207.5, was offered at Rs540. Puravankara Projects that had its IPO priced at Rs400 in August, closed at Rs287.15.
Ashwin Ramarathinam contributed to this story.