Global Crash, Made In China
Worst Ever: Sensex Plunges 1,625 Pts, Rs 7L Cr Investor Wealth Wiped
OutRe Loses 82p, At New 2-Year Low Of 66.65|$
In the 1970s and early '80s, Indira Gandhi and her inner circle would often
raise the bogey of a mysterious, malevolent and invisible `foreign hand',
which was apparently hell-bent on plunging India into turmoil and trouble.
Several decades later, a very visible foreign hand pushed the Indian markets
off a cliff, sending the sensex hurtling to its worst single-day loss in points
from one session close to another. The only consolation, if any , was that the
body attached to the foreign hand was itself taking an even worse battering.
The sensex crashed a record 1,625 points to 25,742, a one-year low level,
leaving investors poorer by Rs 7 lakh crore (over $100 billion) while the
rupee closed at a two-year low of 66.65 to a dollar. The `Black Monday' crash
was caused by fears of a deep and long-lasting slowdown in the Chinese
economy , the second largest in the world, which accounts for 15% of global
GDP and half of all global growth.
Foreign funds took a record Rs 5,275 crore out of Indian stocks. Unusually ,
each of the 30 sensex and 50 Nifty constituents closed in the red.
The global financial bloodbath started after the Shanghai composite index
lost 8%, proving ineffective a series of steps the Chinese government and
market regulator had taken in the last few weeks to stem outflow of money
from the country .
As a result, Japan's Nikkei and the Hang Seng in Hong Kong too crashed over
4.5% each. Major European markets opened with over 4% losses and the
Dow Jones dipped over 1,000 points in early trades, though it bounced back
later to offer a glimmer of hope.
Along with stocks, several emerging market currencies competed in a race to
the bot tom while the dollar and the Japanese yen rallied.
Both the government and the RBI governor stepped in to calm markets. Finance minister
Arun Jaitley downplayed the selloff, saying it was “transient and tempora ry in nature“.
Fund managers are also worried about the possibility of the first hike in rates in nearly a
decade in the US--the largest economy in the world--as they are unsure of how global
markets will re act. Most big players on the Street are hopeful that once the dust from the
current global carnage settles, India could stand out as one of the top investment
destinations. As global investors are gripped by fear and uncertainty in the short run, India
is most likely to be bracketed along with fundamentally weaker emerging markets like
China, Brazil and Russia because of the risk avoidance attitude among foreign fund
“Fundamentally nothing has changed in the Indian market in the past few weeks. Today's
fall was led by a global risk-off mood that has set in with the US and Europe falling,
mirrored by the regional markets, continuing weakness of the rupee, and at the same time
redemptions from exchange traded funds (ETFs),“ said Avinash Gupta, MD & head of
institutional equity sales, Bank of America Merrill Lynch.
“There is still room for markets to correct further but a sustainable pullback
before the September 17 US Fed announcement is looking unlikely . Some
global investors are likely to take a stock specific approach, that is buy into
stocks that they believe in and which have particularly been beaten down
recently ,“ Gupta, who heads one of the largest foreign broking operations in
In the Indian market, real estate and metal stocks were the worst hit. Dealers
said real estate stocks crashed because investors believe that with equity
market too showing weakness, the already struggling real estate sector may
see its troubles aggravating while metal stocks crashed on fears that China,
the largest importer of metals till recently , will cut down on its consumption
of commodities drastically . Globally commodity prices are hovering at levels
not seen since 1999 though gold, considered a safe haven during uncertain
times, recorded a smart recovery .
The day's selling erased about Rs 7 lakh crore from BSE's market
capitalization, now at Rs 92.4 lakh crore. After about two months BSE's
market cap has again fallen below the Rs 100 lakh crore mark.
Monday's sharp fall, that saw several of the midcap and small cap
stocks crashing over 20% each, may also lead to margin selling of stocks
of speculators by brokers on Tuesday morning. At times of sharp
declines in stock prices, if speculators who had bought stocks on
borrowed money can not make up for their losses, brokers are forced
to sell those stocks to cut further losses.Such selling, called
marginbased offloading, often pulls the market even further down,
thus delaying a quick recovery .
10-yr bond yields harden to 7.89%
Mumbai: Along with the stock market, the domestic bond market also
witnessed a massive selloff on Monday with the benchmark yield on
the 10-year government securities hardening 12 basis points (100 basis
points = 1 percentage point) to 7.89%.Bond dealers, however, were
surprised by the market reaction since, usually, bonds and stocks move
in opposite directions and they believe the gilts could soon reverse the
trend. “Domestic economy has adequate number of shock absorbers,“
said Soumyajit Niyogi, interest rate strategist, SBI DFHI, one of the
leading bond houses in India.
For details and bookings contact:-
Parveen Kumar Chadha… THINK TANK
(Founder and C.E.O of Saxbee Consultants & Other-Mother
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Address:-First Floor G-20(A), Kirti Nagar, New Delhi India Postal Code-110015