Panic, recession worries pull Indian equities down

Worries over global slowdown and large-scale selling by foreign funds led Indian equities to witness one of the most volatile sessions during the week ended on Friday and pulled a key index down by over 10 percent on a single day. Looking ahead, analysts expected the volatility to continue in the ensuing sessions, as no positive signs to lift market sentiments were visible on the horizon, at least in the short term. The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which had opened on a positive note on Monday, ended amid complete mayhem on Friday to shed some 1,274.8 points, or 12.77 percent, over the week.
The barometer index has lost over 35 percent during this month and as much as 53.65 percent over the past year. The index reached a high of 21,206.77 percent on January 10 and is now languishing at 8,701.07 points. On Friday, the sentiments were particularly dampened when the central bank kept key lending rates unchanged and maintained status quo on the cash reserve ratio for commercial banks during the mid-term review of the monetary policy. The Sensex that day was down 1,070.63 percent or 10.96 percent. "In this policy, financial stability has been the main priority. Reserve Bank of India had taken aggressive measures, so now they would wait and watch depending on the market volatility,” said HDFC's chief economist Abheek Barua. One of the main reasons for the fall, however, was large scale selling by foreign institutional investors (FIIs) that have been net sellers of equity worth $2.99 billion this month and $12.115 billion during the calendar year. “There was also large-scale selling by hedge funds and even by pension funds to protect their assets. Pension funds normally buy when markets are down,” said Ashish Kapoor, chief executive of Delhi-based Invest Shoppe. Among the major losers during the week were Mahindra and Mahindra, which shed 34.83 percent, DLF Ltd, which lost 30 percent and Hindalco, which lost 32.48 percent. Infosys and ITC were among the few stocks that managed to stay afloat.