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Markets reel under oil fears -- Dow, Nasdaq knock stocks

Our Bureau

MUMBAI, Sept. 18

THERE was bloodbath on Dalal Street today as stocks tumbled into a seemingly bottomless pit. Domestic bourses followed most of the markets in the Asian region which fell today following sizable losses in distant American markets on Friday.

Stocks melted down as crude prices went spiralling to touch $ 36 to a barrel. Soaring prices took the steam off from most of the bourses and the South Korean stock index Kospi collapsed 11.68 per cent to close at 554.82. There were rumours that trading o n the Korean stock exchange was suspended following failure of bailout package for country's chaebol Daewoo Corporation after GM walked out of the deal, traders said.

Dow Jones Industrial Averages index fell 160 points (1.44 per cent) and Nasdaq dropped 2.01 per cent at 78.6 points on Friday. Monday's meltdown began with Nikkei falling 152 points, Singapore STI losing 37 points and Hang Seng in Hong Kong washing away 689 points.

Back home, the benchmark BSE-30 Sensitive index was not the only loser on the day. It had another companion, the rupee which lost 25 paise to close at new low of Rs 46.03/05 to a dollar. The Sensex lost 195.97 points, or 4.30 per cent to close at 4366.41 . At NSE, the S&P CNX Nifty shed 62.85 points or 4.43 per cent to end at 1417.20. Almost all the sectoral indices registered losses with BSE IT sector index losing the most - 253 points or 6.82 per cent to close at 3457.40.

The sell-off on Monday was triggered by largescale unwinding of long positions by operators and the nervous sentiment prevailing in other markets which were jittery over the unabated rise in the oil prices. There were also rumours of tension building bet ween Iran and Iraq, two west Asian neighbours locked in cold-war. Two Arab States drew a warning from the US as recent hostilities between the two could further fire the oil prices, it is feared.

``Local markets were expected to correct following nervous sentiments in the global markets,'' Ms Chandan Desai, fund manager at JM Mutual Fund said. ``The unabated rise in oil prices could put the global currencies under pressure,'' dealers said.

Many operators squared off their long positions on fears of slow down in portfolio investments from foreign institutional investors (FIIs). As rupee began its slide, FIIs seem to be taking a back seat. FIIs are reported to have sold Indian equities worth over Rs 329 crore in the last three days in a row with net investments of over Rs 727 crore till September 15.

Blazing crude oil prices brought down the stock, forex and money markets across the nation on Monday. The Sensex collapsed by 195.5 points, the rupee closed against the dollar at an all-time low of Rs. 46.03/05 and government papers lost around 35 paise as traders in the three markets fed on each others fears of bad times for the Indian economy.