Unprecedented losses posted by top financial services firms on Wall Street pushed global stock markets into a tailspin and India could not hold on despite strong third-quarter results by domestic companies. January has not brought in the traditional foreign fund flows that one witnessed in the last few years and to the contrary foreign portfolio investors have been net sellers.
The Prime Minister's Economic Advisory Council's lowering of economic growth projection for 2007-08 to 8.9 per cent on Thursday also impacted the market sentiments.
The Sensex was down 10 per cent from its all-time high of 21,206.77 as it plunged below 19,000 during the day's trade. The Sensex ended the day 3.49 per cent lower at 19,013.70 and the Nifty was down 3.52 per cent at 5,913.20. With five consecutive days of fall, the Sensex closed the week with an 8.7 per cent loss, the worst since May 2006.
"Selling pressure was intense, even in the first half hour's trade. Domestic institutions were on the sidelines. The only hope now for the markets to stabilise lies with George Bush," said Anita Gandhi, head of Institutional Sales, Arihant Capital Markets, referring to the anticipated special package from US President Goerge Bush to shore up the US economy. Banks were major losers as the US sub-prime losses cast a shadow and other sectors badly hit were real estate and oil. Inflation inching up again brought down hopes of any rate cuts, adding to the sombre mood. Foreign funds sold stocks worth over Rs 4,465 crore in the last two days.
"A positive Budget is the only trigger, which is 40 days away," said Sapan Patel, a BSE member.
Sensex heavyweights Reliance and ICICI Bank shed 6.6 per cent and 5.6 per cent, respectively. Wipro, which reported profits a little lower than market expectations, ended the day nearly 1 per cent lower, extending losses. Ranbaxy was one frontline stock that posted a gain of 5.10 per cent after it said it was likely to end the year with 25 per cent profit growth.