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Tuesday, Mar 18, 2008
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Sensex tumbles again

Oommen A. Ninan

With global credit woes deepening, it sheds 951 points

MUMBAI: As global credit woes deepened further and the United States battled to recover from a financial slump, Indian stock prices tumbled again on Monday by 951.03 points (Sensex’s second biggest single-day points fall), closing the benchmark stock index below 15,000, a seven-month low.

The fall was accelerated by the plunge of the dollar against all major currencies.

“There is a complete negative sentiment right now,” said Mayank Shah, Chief Executive Officer of Anagram Stock Broking. “The weakness will continue in the near future.”

The fall was largely driven by international events. The fifth-largest U.S. investment bank, Bear Stearns, was bought over by JP Morgan Chase & Co. at a rock-bottom price of $2 per share.

Last Friday, its share price fell from $60 to $30 before JP Morgan bailed it out. (Last year its share price was quoted at $172.61.) This sent shivers across the globe, and Japan’s Nikkei fell by 3.71 per cent.

Meanwhile, the U.S. Federal Reserve called for an emergency meeting and cut the discount rate by 25 basis points to 3.25 per cent, which is an indication of the continuing financial uncertainties in the U.S. The U.S. Fed is scheduled to meet on Wednesday.

Further, the U.S. Federal Reserve expanded lending to securities firms for the first time since the Great Depression to prop up the financial system. It agreed to finance up to $30 billion to support Bear’s assets.

The dollar crashed against the Japanese Yen by 4 per cent and it plummeted against the euro at a record low. Gold and low-risk bonds are now the favourites of investors. Future trading in the U.S. is also indicating a weak trend.

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