Sell-off 'tsunami' hits Dalal Street

Sensex recovered some lost ground after dipping 316 points in intra-day trade to end at 6437.91 today.

India's key share index slumped nearly three per cent on Wednesday, retreating from the previous session's intra-day life-time high, as global markets slid on Federal Reserve talk of more US interest rate rises ahead.

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The Bombay index had lost as much as 4.7 per cent earlier -- its biggest intra-day fall since a 17 per cent crash on May 17, 2004. The stock market weakness, coupled with the dollar's strength, took a toll on the rupee, which lost 0.6 per cent.

The index fell 192 points or 2.9 per cent to 6,458.84 points, its lowest close since December 23. The National Stock Exchanges' Nifty fell by 71.55 points or 3.4 per cent to 2032.

Twenty-nine of the index's 30 stocks lost ground, with autos, banks and metals feeling the brunt of the sell-off.

"This is a very healthy correction and was long overdue," said Motilal Oswal managing director Raamdeo Agarwal. "People should realise that this is not a one-way street."

The interest rate-sensitive auto and banking sectors fell sharply, while metal stocks were dragged down by a heavy sell-off on the London Metal Exchange overnight.

Hero Honda Motors Ltd, India's top motorbike firm, dropped 7.4 per cent. The biggest commercial bank, State Bank of India, lost five per cent and Hindalco Industries Ltd, the country's top aluminium maker, shed four per cent.

Compared with a 73 per cent leap in 2003, the Bombay index rose just 13 per cent in 2004, though that represented a 56 per cent rebound from its May 17 low.

The market then started 2005 as it finished last year, racing to a record intraday peak of 6,696.31 points on Tuesday as foreign investors continued to pump money into Asia's fourth-largest economy on hopes of good returns.

Foreign funds moved a net $8.5 billion into Indian shares last year, helping stocks recover from lows in May after the Congress party surprisingly won a national election and formed a Government with support from Communists wary of economic reforms.

Overseas funds then bought more than $120 million worth of Indian stocks on the first two trading days of 2005, though data for Wednesday will not be available until later on Thursday.

RUPEE AND BONDS EASE

Strong foreign inflows had also buoyed the rupee last year, helping it rise 4.9 per cent on top of a 5.2 per cent gain in 2003.

But the Indian currency, which hit a five-year peak on December 31, slipped due to a dollar rebound abroad and expectations that a sharp decline in stock prices would weigh on foreign investment.

The rupee ended at 43.8350/8500 per dollar -- its lowest since December 27 -- down from its previous 43.52/54 close.