The Sensex plunged over 471 points to a five-month low on Monday, closing at 12,415 points. In less than a month, it has lost 15 per cent -a plunge of 2,300 points from the February 9 peak of 14,723 points.
This time, there really was a foreign hand. A seemingly innocuous sell-off in Shanghai last week split global markets wide open. As Asian markets tumbled, the intricate connections among currencies, countries and markets began to unravel. The Japanese currency, the yen, rose against the dollar, leading to a crash in Tokyo's Nikkei stock index.
Worse followed. The US market regulator cracked down on top American brokerages on insider-trading charges. Former Federal Reserve chairman Alan Greenspan's warning on an impending US recession added to the panic.
Indian bourses promptly caught Asian flu. The Sensex opened 400 points lower on Monday.
"It was the contagious effect of the global markets. The domestic market may have to endure some more pain," said Dilip Bhat, director, Prabhudas Lilladher.
At the Bombay Stock Exchange (BSE), foreign institutional investors (FIIs) sold a net of Rs 2,495 crore worth of securities in the past three trading sessions. Although they ended net buyers (Rs 324 crore) on Monday, there will be little impact of that as foreign hedge funds have been selling both in the cash and future segments, according to a BSE member.
As brokers called in cash to cover margins - the credit they usually extend to big investors - another wave of selling added to the fall.
The wipeout was total. Compared to 209 stocks that gained, more than 10 times that number lost. Twenty-eight of 30 Sensex shares fell.
But professional investors are still optimistic. "This is a course correction as the market has been revving up for so long. The underlying story of India remains the same," said Gul Tekchandani, investment adviser.