Mumbai: Indian shares slumped 4.78% on Thursday to their lowest close in more than six months as investors grappled with fears of a local slowdown, rising inflation, the risk of a US recession and credit market problems.
Leading property firm DLF Ltd fell 14.9%, taking its losses for the year to 43.5%, and power producer Reliance Energy dropped 9.9%, takings its losses for 2008 to nearly 44%, as all but one of the top 30 stocks fell.
“The drop in industrial output is a big warning that the economy is indeed slowing and has hit manufacturers the hardest, while the US has hit exporters,” Vinod Bansal, director at investment advisory firm Ficuswealth.com said. India’s annual industrial output growth slowed to 5.3% in January, well below expectations, posing a dilemma for policy makers faced with decelerating economic growth and rising inflation, which has hit a nine-month peak of 5%.
Following are the 10 biggest fall
(Market table: PTI)
The benchmark BSE 30-share index dropped 770.63 points to 15,357.35, its lowest close since Aug. 31. The daily loss of 4.78% equalled the fourth largest fall this year, and took the market’s 2008 losses to 24.3%.
In the broader market, 2,344 losers heavily outnumbered 346 gainers on volume of 340 million shares.
The 50-share NSE index dropped 5.10% to 4,623.60, its lowest close since Sept. 18.
“The government is in a catch-22 situation because if it cuts interest rates, inflation will jump and if it raises rates, growth will slow further,” Bansal said.
JPMorgan cut its forecast for India’s economic growth in the fiscal year starting April 1 to 7% from 7.5%, which would be the country’s slowest pace of expansion in six years.
The deteriorating global and domestic outlooks also hit banks hard. The banking sector index fell 5.6%.
Shares in ICICI Bank fell 4.8% to Rs837.90, their lowest close since Aug. 24, while State Bank of India fell 6.2% to a five-month closing low of Rs1,695.70.
The market has turned sharply after rising by more than a third between Sep. 18, when the US Federal Reserve began cutting US interest rates, and its record high of 21,206.77 on Jan. 10.
One factor has been a turnaround in foreign flows as losses in foreign markets and turmoil in credit markets increases risk aversion. Foreign funds have been net sellers of $3.4 billion of equities this year, after buying a record $17.4 billion in 2007.
Elsewhere in the region, Karachi’s 100-Share index fell 0.64% at 15,074.74, after hitting a record high of 15,231.26 in early deals. Colombo’s All-Share index shed 0.26% to 2,570.40 points.
The stock markets opened distinctly weak as bear operators refrained to surrender their dominance and the BSE benchmark Sensex tumbled by 564 points at 1030 hours following a steep fall in India’s Industrial growth.
The 30-share index opened with a wide downside gap of nearly 255 points and slumped to 15,563.83 at 1030 hours, a fall of 564.15 points over previous close.
Similarly, 50-issue Nifty of the National Stock Exchange also plunged by 183.35 points to 4,688.65 at 10.30 am.
The government’s announcement on Wednesday of a decline in the country’s industrial growth for January to 5.3% from 11.6% in the same month last year along with bearish global sentiment took a toll on share values, brokers said.
According to investors, the recession in the world’s largest economy is now percolating across the globe as Indian economy is also showing signs of cooling down after overnight weak growth data.
To prevent a recession, the US Federal Reserve on Tuesday announced to give $200-billion package to the credit markets, but failed to enthuse marketmen.
On Wednesday, Sensex ended just five points higher despite showing a handsome gain of 560 points in early trade.