Distress Street: Bears pull Sensex below 10,000
MUMBAI: It was one of the biggest psychological setbacks for Indian trading community Friday as the Bombay Stock Exchange’s Sensex closed below the 10,000 mark. The oldest benchmark has lost more that 50 per cent from its all-time highs in just nine months.
The downfall was anticipated, but not on a day when bulls dominated the US and European markets. So what led to the fall? According to marketmen, there was some profit booking in the morning but formation of new short positions in futures, anticipating disappointing data from the US housing market, led to fall in the cash segment as well. Traders also didn’t want to take risk ahead of the weekend.
The breach of 10,000 level on the Sensex is being seen as a huge sentimental blow which is likely to trigger further correction and prevent investors from taking long positions. While some say it will take around 6-9 months for the market to stabilize, others are of the opinion that it will take at least three years for the global markets to get out of the rut created by the US financial market.
“There is dearth of fresh buying as investors are waiting for the markets to stabilise. Market can fall 10-15 per cent to 2,750 on the Nifty and around 8,700 on the Sensex, before forming a bottom. Global scenario is not healthy and volumes are also low. There is no fresh buying even as many A group stocks are available at 60-65 per cent from last October’s valuations. Hedge funds are creating short positions, which is dragging the markets,” said Ketan Malkan, vice-president, India Infoline.
Bombay Stock Exchange’s Sensex closed at 9,975.35, down 606.14 points or 5.73 per cent. It touched an intra-day low of 9,911.32 and a high of 10,786.93. National Stock Exchange’s Nifty closed at 3,074.35, down 5.96 per cent or -195 pts. The broader index touched an intra-day low of 3,046.60 and an intra-day high of 3,335.95. BSE Midcap Index closed 3.07 per cent lower at 3,544.84 and BSE Smallcap Index ended 2.76 per cent down at 4,167.86.
“We have formed a soft bottom and are in the process of formation of a hard bottom, which is likely to be formed around 2800 levels,” said a technical analyst from a local brokerage. Experts are of the opinion that it is not the end of the market and advise investors to enter in a systematic manner. “Global sentiments are at the lowest and this is being reflected in the acute risk aversion of investors, who have shunned equities for the time being.
While it would be difficult to catch the bottom, investors should continue investing into equities in a systematic manner. While the current situation would take some time to mend, if history is any guide to investments, equities have outperformed all asset classes over the long-term and we remain confident that history will repeat itself,” said Hitesh Agarwal of Angel Stock Broking. Biggest losers in the Sensex pack were Reliance Infrastructure (11.96%), Jaiprakash Associates (10.70%), DLF (10.34%), NTPC (10.34%), and Sterlite Industries (8.82%). There were no gainers in the 30-share index. Market breadth turned extremely weak with 1,462 declines against 638 advances on BSE European markets which opened strong, too gave away major gains as US stock futures were pointing toward a weak opening.
FTSE 100 was up 2.13 per cent, DAX moved 1.80 per cent higher and CAC 10 advanced 1.30 per cent. US stock index futures extended losses as a report showing that housing starts slid in September heightened recession fears. Dow Jones Industrial Average futures dropped 136 points and Nasdaq futures fell 27 points.
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Where will the Sensex head to now?
MUMBAI: The bull is on the run! But not in the direction one would want. He’s kicked enough storm and leaving behind him dust which the market is anxiously waiting to settle, so as to ascertain the damage. There are foreign forces behind the madness, as politicians would say--the US sub-prime crisis that has ballooned into a credit crisis across world markets. And there doesn’t seem to any comfort from the measures being taken by the central governments. In one of many such stampedes, the Sensex of Bombay Stock Exchange Friday closed below the 10,000 mark at 9,975.35, a loss of 606.14 points or 5.73 per cent from the previous close. The low of the day was 9,911.32 and high of 10,786.93. The broader Nifty of National Stock Exchange settled at 3074.35, down 194.95 points or 5.96 per cent. The index touched an intraday low of 3046.60 while the high was 3,335.96.
Economictimes.com spoke to the people on the floor to know where it will all end. “I don't think we can forecast a bottom for the benchmark index or how soon we will hit rock bottom. What I am seeing is sustained FII selling and lack of support from domestic institutions such as mutual funds and insurance companies who are sitting on cash to meet redemption pressures.
There is panic fear among overseas investors, who themselves are faced with heavy redemption pressures in their home countries. These (sustained outflows) will have to end for the market to stabilise and SEBI's proactive measures on P-notes to come into effect,” said Geojit Financial Services’ Managing Director, CJ George, of the Sensex breaching the 10K mark.
Being more specific, Sandeep Waghle, chief technical analyst of Angel Stock Broking, said, “The Sensex went close to 10,000 and bounced back as fresh buying came in and some short positions were also covered. But the mood is bad and Sensex may go down to 9000 and Nifty may test 2900.” Manas Jaiswal, senior technical analyst at Emkay Shares and Stock Brokers, painted an even grim picture. “Market mood is extremely bearish and we expect Nifty to touch 3050 next week. It may fall to 2600 in next two months,” he said. Speaking on the forces that be, N K Garg, CEO of Sahara Mutual Fund, said, “There is an imbalance now. FIIs are having hassles in their country. This is a crucial time for markets. I wouldn't like exiting.” Continued...Next >>
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Post Session Commentary - Oct 17 2008
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Source: All Leading web sources.
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