The Bombay Stock Exchange Sensex, plunged 432 points or 2.1% — the highest intraday fall in five months —on Friday, mirroring the collapse of all global markets, led by China’s 5.2% crash.
The Sensex closed at 20,157, while the broader Nifty at the National Stock Exchange closed at 6,072. The Sensex has lost 848 points or 4% since it closed at its all-time high of 21,005 on Diwali, exactly a week ago.
Market participants pointed out four reasons for the fall. One, Ireland’s worsening debt woes; two, weaker than expected growth in the September Index of Industrial Production (IIP); three, failure of the G20 summit in Seoul that concluded on Friday without any reasonable action on the ongoing currency wars.
But the most important reason for the fall was China’s explicit signal — the first time ever — that it would take fresh measures to cool its overheated economy and rising inflation.
Experts feel that markets reacted to the day’s developments, both global and domestic, and not too much should be read into this correction as the fundamental structure of the economy remains intact.
“What’s moving the stock up and down is the global markets and allocation of funds to emerging and developed economies,” said Aseem Dhru, CEO, HDFC Securities. “Weak IIP numbers just added to the worry. Take any dip as an opportunity to invest.”
“There is no need to panic,” said Leif Lybecker Eskesen, chief economist for India and the ASEAN region, HSBC Singapore.
“The slowdown reflects the above-normal downpour in September and last year’s high base.” Weak participation by foreign institutional investors (FIIs) also had its impact. Over the last two days, when the markets fell by 719 points, FII participation was muted — they invested just R218 crore against a total FII investment of R17,268 crores in November.
In India the biggest losers were the real estate, consumer durables and metal stocks. The real estate index at the BSE fell 4.8% during the day. At 5.5%, DLF was the biggest loser among Sensex companies.