it started a year ago
GREED AND fear are always the most dominant themes on the stock market. Since May 11, when the BSE Sensex closed at a lifetime high of 12,671, the index has lost 3,609 points.india Updated: Jun 14, 2006 01:21 IST
Sensex continues to drop, nearing bull-run start last June
GREED AND fear are always the most dominant themes on the stock market. Since May 11, when the BSE Sensex closed at a lifetime high of 12,671, the index has lost 3,609 points.
What is perhaps more pertinent is its rise and fall over the past one year. Since June 20 last year -- when the Ambani settlement galvanised the markets into a bull orbit, as they crossed 7,000 for the first time ever -- the wheel has more or less come full circle.
On Tuesday, as the markets awaited the US Federal Reserve's latest cue on interest rates on June 28, the meltdown continued unabated. The Sensex collapsed by another 413 points (4.36 per cent).
The Fed is looking at hiking interest rates for an unprecedented seventeenth consecutive time later this month. Vasudeo Joshi, head of research, Man Financial, says: "The possibility of an another Fed rate hike, rising oil prices, virtual inaction on the reforms front, domestic political issues about office of profit and reservations will cap the upside. The market has the potential to revert to the median fall level of 8,500."
During a volatile session, the Sensex tanked 482.57 points to reach an intra-day low of 8,993.58, its lowest level since December 8 (when it traded around 8,906). It, however, recovered slightly in the closing hours and ended at 9,062.
The Nifty also exhibited similar patterns, plunging to an intra-day low of 2,638 before closing at 2,663 -- an erosion of 113 points.
Morgan Stanley's Andy Xie says, "Less-experienced investors in China and India have poured funds into hot concepts like commodities, causing a classic mania. Gravity is causing the mania to unwind."
The Sensex has lost over 25 per cent from the peak of 12,671.11 on May 11. Stockbroker and value investor Rakesh Jhunjhunwala, one of the poster children of the year-long boom, has reportedly lost Rs 700 crore over the past month. On May 10, his net worth was in the vicinity of Rs 2,000 crore. Now with his value picks -- BEML, CRISIL, Lupin, Punj Lloyd and Titan among others -- facing a rout, the depletion is staggering.
Analysts attribute the fall to overall bearish sentiments in the global markets, primarily precipitated by concerns of a rise in interest rates in the US markets.
In India, the RBI last week raised the benchmark repo and reverse repo rates by 0.25 per cent. This raised concerns about a fall in corporate profits triggered by the high cost of funds.