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Sensex sheds 372 pts on weak global cues

The 30-share index loses 372 points after global concerns worsen amid France's second largest lender Societe Generale disclosing one of the biggest ever bank frauds.

business Updated: Jan 24, 2008 21:11 IST

The stock market turned weak on Thursday with the benchmark Sensex losing 372 points here after global concerns worsened amid France's second largest lender Societe Generale disclosing one of the biggest ever bank frauds worth over seven billion dollars.

After opening on a strong note and gaining close to 600 points in morning trade, the Sensex returned to its southward journey and settled 2.21 per cent down at 17,221.74 points after a volatile session.

Today's downslide made the yesterday's recovery short- lived when the Sensex had gained 864 points after a plunge of close to 4,100 points in the previous seven trading sessions.

The market breadth was also sharply negative with just about 14 per cent stocks managing to close with gains. Major losers included NTPC, Reliance Energy, Larsen and Toubro, ONGC, DLF, Reliance Industries and ICICI Bank.

Among Sensex stocks, only six -- HDFC, Satyam, Reliance Communications, SBI, Bharti and ACC-- managed to close higher.

The selling pressure began today on the domestic bourses on concerns that worries in the financial markets would only get bigger with Soc-Gen disclosing one of the biggest ever bank frauds in the world.

While Soc-Gen is itself a major FII investing in India, the speculations that this development would affect investment from other FIIs as well, due to its major position in markets across the world, led to panic selling in Indian stocks, a broker said.

The French bank said that it would raise 8.1 billion dollars in new capital due to losses from fraudulent trading by one of its traders on the bank's account as well as for the write-down worth close to three billion dollars related to the US sub-prime crisis.

Trading in the bank's shares were suspended today, while its shares have been under pressure already for the past few days on speculations about further sub-prime-related losses.

Major financial institutions like Citigroup and Merrill Lynch have already announced huge sub-prime losses, while putting pressure on stock markets across the world, including India.

Huge selling by FIIs and weak global cues have been the key factor behind recent plunge in Indian stocks, which has lost close to Rs 16,00,000 crore (400 billion dollars) in a meltdown since January 14. During the past nine trading sessions, the market closed on a positive note only yesterday.

Soc-Gen said in a statement today that it discovered the fraud last week-end in a sub-section of its market activities, where a rogue trader at futures desk took "massive fraudulent directional positions in 2007 and 2008 beyond his limited authority.

Soc-Gen said that the trader, used his knowledge of bank's security systems to hide his positions through a number of fictitious transactions, but has now confessed to the fraud.