Date:18/12/2007 URL: http://www.thehindu.com/2007/12/18/stories/2007121856021600.htm

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Second highest single day fall in Sensex

Special Correspondent

Global inflation concern triggers selling; emerging markets turn easy

BSE sensitive index nosedives by 770 points Metal, oil and realty stocks suffer setback

— PHOTO: AFP

market WORRIES: Investors watching a stock ticker outside the Bombay Stock Exchange in Mumbai on Monday. Share prices closed down 3.84 per cent amid Asia-wide market worries that rising inflation could halt U.S. interest rate cuts.

MUMBAI: Indian stocks tumbled on Monday along with its Asian and European peers fearing inflation concerns in the U.S. Strong U.S. inflation data indicated that the U.S. Federal Reserve would not cut interest rates further in the near future. Global inflation was a concern for central banks as well as markets as a strong inflation rate would hit the corporate profits.

The Bombay Stock Exchange (BSE) 30-share sensitive index (Sensex) witnessed its second highest single day fall closing with a loss of 769.48 points or 3.84 per cent at 19261.35. The 50-share Nifty recorded its biggest ever single day fall with a loss of 270.70 points or 4.48 per cent at 5777. While almost all sectors witnessed a downward trend, the fall was led by metal, oil and gas, realty and power stocks. The BSE mid-cap was down by 3.87 per cent at 9105.58 and the BSE small-cap by 2.91 per cent at 11840.02.

The recent rise in stock markets was a phenomenon triggered by the U.S. Fed’s decisions to cut rates.

Credit woes in U.S.

Since the credit woes erupted in the U.S. in August last, the U.S. Fed cut rates three times and markets were expecting another cut in January 2008 to make the benchmark interest rate to four per cent. “We are not perturbed by the fall per se. But we are also expecting it to come down to realistic levels and the build-up which is happening in the mid-cap had to get rationalised,” said Girish Dev, Chief Executive Officer, Networth Stock Broking.

“Even though in the long-term we still see lot of value, there will definitely be bottom fishing with a further 500-600 point fall.” Other than the U.S. inflation rate, Mr. Dev felt that there was some kind of a concern which had been building up with talks of China slowing down.

Meanwhile, Standard & Poor’s, the leading provider of financial market intelligence, stated on Monday that the world’s developed and emerging equity markets posted negative returns in November as concerns over portfolio asset values, mostly housing related, weighed heavily on financial markets. It stated that while developed equity markets fell by 4.39 per cent in November, emerging equity markets lost 6.18 per cent. World equity markets turned lower in November as the financial liquidity crunch, as well as the related earnings charges, continued to weigh down the markets, said Howard Silverblatt, Senior Index Analyst at Standard & Poor’s.

The BSE metal index was down by 7.28 per cent at 18324.50, oil and gas index by 5.13 per cent at 12314.72, power index by 4.80 per cent at 4222.68, and the realty index by 5.65 per cent at 11699.36.