The Hindu : Business : Sensex plunges by 506 points on panic selling

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Tuesday, Sep 30, 2008
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Sensex plunges by 506 points on panic selling

Special Correspondent

U.S. real estate crisis spreads to European banks

MUMBAI: As the U.S. sub-prime (real estate) credit crisis spreads to Europe, the Asian and European markets tumbled along with domestic bourses on Monday.

The Bombay Stock Exchange (BSE) 30-share sensitive index (Sensex) plunged by 506.43 points or 3.87 per cent to 12595.75, a two-month low. In a panic stricken trading, intra-day, the Sensex touched a low of 12402.84.

The much-awaited U.S. bailout package of $700 billion for its financial institutions failed to enthuse the markets around the world. Reflecting this mood, on Indian bourses, banking stocks tumbled to lower levels. On the BSE, the banking index, lost 6.02 per cent, followed by IT 5.47 per cent, realty 5.28 per cent and power 5.22 per cent. As the financial package awaits Congressional approval, many caveats included by the U.S. law makers, generated skepticism among market participants.

The share price of ICICI Bank dropped by a steep 12.11 per cent at Rs. 493.30 on expectations that the bank might have a major exposure to the failing financial products of the West. Other major banks which ended in the negative territory are: State Bank of India (2.04 per cent) at Rs. 1,405; HDFC Bank (3.71 per cent) at Rs. 1,199.50 and Karnataka Bank (9 per cent) at Rs. 120.35.

The broad-based National Stock Exchange’s 50-share Nifty lost 135.20 points, or 3.39 per cent at 3850.05. It recorded a low of 3777.30 in intra-day.

Now the next danger for the markets is the contagion effect of the U.S. real estate, which is spreading to the European banks. It is reported that two European banks — Belgian Fortis and British Bradford & Bingeley — to be saved by the respective governments.

The proposed U.S. legislation would disburse the $700 billion in stages. The first $250 billion would be issued when the legislation is enacted, while another $100 billion could be spent if the President decided it was needed. The remaining $350 billion would be subject to the review of the U.S. Congress.

In Asia, Japan’s Nikkei closed down by 149.55 points at 11743.60 and Hong Kong’s Hang Seng lost a huge 801.41 points at 17,880.70.

While writing this report, the U.S. markets are tumbling: Dow Jones Industrial Average (DJIA) is down by 300.43 points at 10842.70, Nasdaq by 90.68 points at 2092.66 and the S&P 500 by 38.72 points at 1174.29.

Rupee hits 47-mark

PTI reports:

The Indian rupee on Monday breached the 47-mark for the first time in two years before closing a tad lower at 46.96/97 against the dollar on sustained demand for the greenback amid worsening situation in global financial markets. The rupee fell by 42 paise over its Friday’s close of Rs. 46.54/55. Meanwhile, oil prices fell to near $ 103 a barrel on Monday in Asia on concerns that economic growth will slow across the globe.

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