Indian equities tank seven percent in day-long mayhem

IANS
Posted: Friday, October 10, 2008, 09:32 am EST

Mumbai, Oct 10 - As fears over the impact of the global financial crisis on the Indian
economy escalated Friday, a key Indian equities index closed with one of its steepest
losses in recent months, with interventions by the government, the central bank and the
markets watchdog having little impact to lift the battered sentiments.

The sensitive index - of the Bombay Stock Exchange, which at one point was down
1,088.60 points, made a marginal recovery to end at 10,527.85 points - but still down
800.51 points, or 7.07 percent, over the previous close.

The situation was no different at the National Stock Exchange - where the broader S&P
CNX Nifty index was down 6.65 percent at 3,279.95 points, over the previous close at
3,513.65 points.

'The fatal fall in the markets today was due to the acceleration of outflows by foreign
funds, amid fears of credit crisis in the West,' said, Ashok Jainani, head of research with
leading brokerage, Khandelwal Securities.

'This fall was in line with what is happening across the globe. With foreign funds being
major players, Indian markets cannot remain insulated from the financial meltdown,'
added Nagendra Bhatnagar, chief executive of IDBI Capital.

Foreign funds have been net sellers of equity to the extent of $10 billion during the
current year.

Each of the 13 sector-specific indices of the Bombay Stock Exchange - ended in the red,
while just two out of 30 scrips that make up the Sensex managed to buck the trend.

India's largest pharmaceuticals company Ranbaxy Laboratories, with a gain of 4.71

percent, and the country's largest commercial bank, the State Bank of India, up 2.27
percent, were the only two Sensex scrips that ended in the positive territory.

Reliance Communications, down as much as 21.02 percent, ICICI Bank, down 19.71
percent and Reliance Infrastructure, down 19.26 percent, led the losers in what analysts
termed as a bloodbath in the Indian share markets.

Indian's main equities market, which was not too long ago among the best performers
within emerging economies, has shed some 28.20 percent in the past month and 43.58
percent over the past year, data with the BSE showed.

In the past week alone, the 30-share Sensex, often taken as a barometer of the
performance of Indian equities, has shed 15.95 percent.

The markets opened very weak Friday and within minutes into trading, the Sensex had
fallen by 1,088.6 points to 10,239.76 points, the single largest intra-day fall since Jan 22,
2008, when it had shed 1,111 points.

Sensex Snapshots:

Friday Open: 10,632.27

Friday Close: 10,527.85

Friday High: 10,904.13

Friday Low: 10,239.76

Previous Close: 11,328.36

Change in points: -800.51

Change in percentage: -7.07

52 week fall in percentage: -43.58

Change of small-cap -: -7.31

Change in mid-cap -: -8.34

Top gainer: Ranbaxy

Top loser: Reliance Communications

Soon after trading commenced Friday, Finance Minister P. Chidambaram announced the
formation of a panel under Finance Secretary Arun Ramanathan to study the impact of
the global financial turmoil on the Indian economy that will give a report within a year.

This was soon followed by a reduction of 100 basis points in the cash reserve ratio - for
commercial banks to increase liquidity in the markets, which came on the back of a 50
basis points cut that was announced by the central bank Monday. The markets watchdog
also said there was no problem of settlements.

Even as the markets were responding to these interventions, news came that the country's
industrial production had grown by a mere 1.3 percent in August and put paid to all
positive observations on the robustness of the Indian economy, especially by the finance
minister.

'It's a bad situation. Fundamentals don't work at such times. It's a cyclical chaos where
more liquidity in the market means inflation will go up and less liquidity means money
market will be affected,' said Bijay Murmuria, director of Kolkata-based Sumedha Fiscal
Services and president of the Association of National Exchanges Members of India -.

'The CRR cut by the RBI is actually causing more worry because if instead of a one-off
measure this is the beginning of a regime of liberal policies in India, then the
repercussions will be even more severe,' said analyst Jagannadham Thunuguntla.

'That India's banking system is still sound is only because the previous RBI governor
Y.V. Reddy refused to adopt liberal policy measures throughout his entire tenure despite
repeated requests to do so in face of the bull market,' Thunuguntla, the head of the
capital markets arm of India's fourth largest share brokerage firm, the Delhi-based SMC
Group, told IANS.

'Although there is a desperate need for liquidity in the system the RBI should make sure
that Indian banks do not go overboard on their loan-deposit ratios like the US and
European banks,' echoed portfolio strategist and US-trained chartered financial analyst
Manoj Krishnan of Delhi-based Price Investment Management and Research Services.