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Wednesday, Mar 04, 2009
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Business

Markets on a tailspin

Oommen A. Ninan

Deepening global financial crisis drags BSE barometer down

MUMBAI: The Bombay Stock Exchange (BSE) sensitive index (Sensex) on Tuesday closed at a three-year low on heavy selling by funds following deepening financial crisis globally.

The Sensex lost 179.79 points or 2.09 per cent to close at 8427.29, after dipping to the day’s low of 8390.21 as funds preferred to sell blue chip stocks, led by consumer durables (3.15 per cent), FMCG (2.59 per cent), technology (2.15 per cent) and banking (2.10 per cent).

The 50-share National Stock Exchange (NSE) index Nifty dropped by 52.20 points to 2622.40 after touching a low of 2611.55.

Most Asian stock markets extended their loss on Tuesday after continuous troubles at financial giants such as American International Group (AIG) and HSBC sent shock waves in the global financial scene. However, the European markets closed marginally higher except U.K.’s FTSE 100, which lost 44.38 points. France’s CAC 40 gained 16.92 points and Germany’s DAX gained 28.91 points.

Japan’s Nikkei lost 50.43 points at 7229.72, marking around 26-year-low, and Hong Kong’s Hang Seng lost 283.58 points at 12033.90.

The global financial markets believe that the uncertainty is unending with the announcement of insurance major AIG a $62 billion loss for the fourth quarter, the biggest in U.S. corporate history. It also accepted a bailout from the U.S. Government. The banking major, HSBC Holdings plc, stated that it needed to raise nearly $18 billion in new capital through a share issue and reported a 70 per cent drop in earnings for last year. Markets expect this quarter to be the worst-ever for the financial world.

The U.S. benchmark index Dow Jones finished below 7000 on Monday for the first time since May 1, 1997. The U.S. Standard & Poor’s (S&P) 500 index tumbled to its lowest close since October 1996.

The IMF cut its forecast for global growth recently to 0.5 per cent in 2009 from an earlier prediction of 2.2 per cent. It also forecast a 2 per cent slide in economic output from the world’s most advanced economies as a whole.

Among other broader indices in the domestic market, the BSE midcap lost 43.85 points or 1.62 per cent, smallcap 39.72 points or 1.30 per cent and the BSE 500 lost 57.36 per cent or 1.83 per cent. However, while writing this report, the U.S. markets opened higher on Tuesday compared to its closing on Monday. The benchmark Dow Jones was up by 61.49 points at 6821.78, Nasdaq by 13.53 points at 1336.38 and the S&P 500 by 8.74 points at 709.56. On the BSE, the consumer durable sector index fell by 3.15 per cent to 1496.33, followed by the FMCG index by 2.59 per cent to 1941.07.

PTI reports:

Rupee breaches 52-mark

The rupee breached the 52-mark for the first time on sustained capital outflows amid weakness in equity markets, but closed higher at 51.97/98 against the dollar on Tuesday. It closed at 51.94 on Monday.

British financial firm Barclays Capital has said that the rupee might depreciate further to hit 56 against the greenback in just three months as slowdown would arrest dollar inflows. The rupee initially touched a high of 51.55, recovering from Monday’s close of 51.93/94 on selling by exporters and a well-known large corporate, dealers said.

In fairly active trading at the interbank foreign exchange market, the domestic currency resumed higher at 51.80/81 a dollar. But sustained weakness in equity markets and increased capital outflows later weighed on rupee and it fell back to cross 52 to a low of 52.20 before closing at 51.97/98.

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