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More blood on Street

Sensex hit seven month low on Monday and closed with a 951 point, or 6.03%, loss at 14,809.49, reports MC Vaijayanthi.
Hindustan Times | By M.C.Vaijayanthi, Mumbai
UPDATED ON MAR 18, 2008 04:23 AM IST

It is the fear of the unknown that is keeping even cash-rich entities like insurance company away from stocks as Sensex hit seven month low on Monday and closed with a 951 point, or 6.03 per cent, loss at 14,809.49.

In May, when US financial services firm Bear Stearns reported losses in two of its hedge funds due to exposure to sub-prime mortgages, global markets fell, but shrugged off fears of a serious crisis. Since then, the credit market crisis has worsened, threatening recession in the US and slowdown across global economies.

Analysts said as of now they are looking at 14,000 as the possible support level. “Sensex was at 14,000 before Fed started cutting rates in September last year. Since then liquidity drove stock prices up,” said Anita Gandhi, head of institutional business, Arihant Capital Markets.

Yet another round of rate cuts, likely out of Tuesday’s Federal Reserve rate cut, can bring some improvement to the markets, if not at least arrest a further fall, say market participants.

Sunday’s JP Morgan buyout of Bear Stearns for a nominal sum of $2 dollars a share and the Federal Reserve’s emergency meeting where it cut overnight lending rates to banks brought in fresh wave of selling in all the markets, including India.

“Back home, the bulls are likely to be on strike for considerably longer period of time. A gap-down opening is a given. Do not buy hoping for a miracle immediately. If you have the money (not borrowed) and the patience we need not tell you to buy,” said India Infoline in its morning note to investors.

There was not a single gainer in the Sensex as it crashed by over 1,000 points during the day. Bank and financial stocks plunged deep into the red. ICICI Bank was at a year’s low at Rs 743 and State Bank of India, whose ongoing rights issue is priced at Rs 1,590 a share, fell to Rs 1,633.

“Fear of more disturbing news from global markets is weighing heavy on traders’ minds. Even long-term domestic players like insurance companies and mutual funds are staying clear of the market,” said DD Sharma, vice-president (research), Anand Rathi Securities.

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