M A I N   N E W S

Mayhem Day II
Sensex sinks deeper but cuts losses
Global selloff on fears a US recession will hit the rest of the world
Shiv Kumar
Tribune News Service

Mumbai, January 22
Amidst reports that the bull market is giving way to the beginning of a bear market around the world, the Sensex took a hammering that forced the Bombay Stock Exchange to shut minutes after opening.

In only the fourth such instance since the Sensex was officially inaugurated, trading was suspended for nearly an hour after the markets hit the 10 per cent lower circuit filter minutes into opening.

Overnight news from the European markets and early morning indicators from other Asian markets continued to be pessimistic and sellers predominated in today's opening hours. The US markets were closed on Monday.

A semblance of sanity returned after the markets opening at around 11 am though the bourses continued to be in the red. The benchmark index, Sensex, closed at 16,729, down 4.97 per cent or 875 points after touching a low of 15,332 levels in intra-day trade. It recorded its biggest intra-day fall of 2,273.93 points, but the government's reassurance about the health of the economy helped the benchmark partially recover the losses.

In broader markets, Nifty closed at 4,899 levels, down 5.94 per cent or 309 points.

Analysts say there is more pain in the markets and should the Dow open further in the red, the flow of blood in the Indian markets may continue as well, as the FIIs pull out funds to deploy in the safer developed markets where valuations are more attractive.

Signs of panic are everywhere with the Asian markets closing weak.

Hong Kong's Hang Seng was the biggest loser, reporting a loss of 8.65 per cent. Japan's Nikkei and South Korea's Kospi were close behind falling by more than 4.43 per cent each.

Major losers today were ONGC, ITC, Hindalco and Mahindra & Mahindra, which were lower by 9.14 per cent each.

Among sectoral indices, the BSE oil & gas index was the biggest loser, falling 10.05 per cent. Metal, healthcare and real estate indices also closed in red.

Though a semblance of sanity was restored later in the session, the morning's panic threw trading completely out of gear. Many brokers refused to take orders from customers on the grounds that their credit lines were frozen. Online trading services jammed and many investors complained of being unable to buy when the prices of blue chips touched rock bottom.

Outside the Bombay Stock Exchange building, investors watching the live trading screen shouted slogans against finance minister P Chidambaram, blaming him for the market crash.

Some investors tried to deface the cast-iron sculpture of the bull installed outside the stock exchange building and had to be dispersed by the police.

In Delhi, Chidambaram sought to calm fears of investors, saying the Indian economy was strong enough with an expected growth of 8.9 per cent this year. "There is no reason to allow the worries of western world to overwhelm us, our economy is very strong," Chidambaram told reporters.

He insisted that the fundamentals of the Indian economy were strong enough and that corporate profits were high as was the tax paid by companies.