Record rise of crude oil and gold prices in global markets and growing concerns over the worsening credit crisis in the US triggered a Sensex collapse on Monday, allowing the benchmark 30-share index of the Bombay Stock Exchange (BSE) to hit a six month low and close below the psychological 15,000 level.
Heavy selling across all counters triggered the market collapse, as the Sensex lost 6.03 percent or 951.03 points to close at 14,809.49, its lowest ever since Aug. 24, 2007. It touched the day's low of 14,738.27 and a high of 15,326.93 points.
The key index is closing below the 15,000 level for the first time since June 29, 2007.
Monday's drop is the second biggest fall in absolute terms. The Sensex lost 1,408 points on Jan. 21, recording the biggest ever fall in its history.
This is the third time in this month the Sensex has shed over 700 points in a single trading session. Earlier, on March 3, the prime index plunged 900.84 points and on March 13, it shed 770.63 points.
The investors notional wealth, which stood at Rs.52,24,076.16 crore ($1.306 trillion) on Friday last week, saw an erosion of over Rs.3.18 lakh crore ($79.5 billion) on Monday.
Not a single blue chip stock was spared on Monday with all the components closing in the negative zone.
The biggest loser was India's No.2 bank, ICICI Bank which fell 13.76 percent to Rs.757.40, its lowest close in more than a year, on concerns about the bank's total exposure to the derivatives and credit market.
Close on its heels was top listed firm, Reliance Industries (RIL) which lost 6.1 percent to Rs.2,180.60, taking its loss to over 24 percent this year.
The two stocks constitute about a quarter of the weight of the index.
Mortgage lender Housing Development Finance Corporation (HDFC) ended 11.07 percent down at Rs.2,225.55, while HDFC Bank closed with a loss of 5.89 percent at Rs.1,238.50.
Top lender State Bank of India shed 4.72 percent to Rs.1,633.40 on news that the bank had lost Rs.1 crore on its overseas exposure to credit derivatives market.
Hindalco was down 9.20 percent at Rs.164.85, down 9.20 percent and Jaiprakash Associates, which replaced Bajaj Auto in the Sensex on Friday, slipped 11.94 percent to close at Rs.208.05.
Reliance Energy Ltd (REL) plunged 8.13 percent at Rs.1190.80 while Tata Steel ended down 7.93 percent at Rs.658.50.
Other shares registering heavy losses were DLF, Larsen & Toubro (L&T), Reliance Comunications and Grasim Industries which lost 7.86 percent, 7.03 percent, 6.87 percent and 6.55 percent to close at Rs.602.80, Rs.2,703.50, Rs.482.75 and Rs.2,670.85 respectively.
Ranbaxy Laboratories (down 5.63 percent), Tata Motors (down 4.65 percent), BHEL (down 4.41 percent), ACC (down 3.69 percent), NTPC (down 3,67 percent) and Maruti Suzuki (down 3.43 percent) also suffered losses.
Among IT stocks, Wipro was down 3.75 percent and bigger rival Infosys Technologies was down 2.5 percent.
Bharti Airtel Ltd closed 1.4 percent down at Rs.742.70, after paring losses of more than 6 percent during trade.
The BSE index has fallen 27 percent so far this year having shed over 5500 points, and is more than 30 percent below its record high of 21,206.77 hit on Jan. 10.
Among the sectoral indices, BSE Consumer Durables index, BSE Bankex, BSE Realty index and BSE Metal index recorded heavy offloading falling 9.69 percent, 9.06 percent, 7.86 percent and 7.54 percent to end down 3,638.56, 7,569.16, 7,106.53 and 13,725.52 respectively.
Other indices to perform badly were BSE Consumer Goods index (down 6.43 percent), BSE Power index (down 5.58 percent), BSE Oil & Gas index (down 5.34 percent) and BSE Healthcare index (down 5.20 percent).
BSE PSU index, BSE Auto index, BSE TECk, BSE IT index and BSE FMCG index also ended in the red, closing down in a range of 4.97-3.18 percent.
The BSE Midcap and Smallcap indices ended in the red losing 6.97 percent and 6.90 percent respectively.
The BSE market breadth was extremely negative as 2,404 shares declined, 282 shares advanced and 30 shares remained unchanged.
The broader 50-share S&P CNX Nifty of the National Stock Exchange (NSE) fell 5.11 percent or 242.70 points to 4,503.10, its lowest close since Sept. 17, after touching a low of 4,482.10 and a high of 4,745.45 points.
It's total panic reaction. A lot of uncertainty still prevails among investors and nobody is able to gauge the panic in the system that is leading to such a drastic fall, said financial analyst S.P. Tulsiani of S.P. Tulsian.com.
Global concerns are weighing heavily on Indian markets, he added.
We are completely linked to the global markets, said Gajendra Nagpal, chief executive of Unicon Financial. There's a lot of liquidity sitting on the sidelines but no one wants to be the first to enter the market.
News that JP Morgan Chase & Co would buy stricken US investment bank Bear Stearns for just rock-bottom price of $2 a share (or at 1/40th its share price a month ago), followed by the US Federal Reserve's move in making an emergency cut on the discount rate it charges on direct loans to banks by a quarter percentage and announcement of a new program to lend directly to other big financial firms, have dampened global market sentiments, traders said.
The $240 million deal, announced Friday, comes after a shortage of cash forced Bear Stearns to seek short-term financing from the Federal Reserve through JP Morgan Chase Friday after clients pulled $17 billion from Bear Stearns over two days, the Bloomberg financial news reported.
It's a kind of forced selling amid the turbulence in the global markets, said D.D. Sharma, vice president at Anand Rathi Securities. The worsening conditions of the financial system in the world is having a very bad impact on the Indian markets.
Today's slump was a function of global problems and had nothing to do with the fundamentals of Indian companies. Apart from reporting huge write-downs, the fact that Bear Stearns had to sell out to JP Morgan with help from the US Federal Reserve makes people question - who's next- Sharma said.
Foreign institutions are also selling Indian equity fearing firms like Stearns have exposure to Indian companies. Extreme fear and caution has set in the minds of investors, which is why we didn't see any sort of pull back, he added.
In early trading Indian shares dipped when they reacted negatively to the sale of US investment firm Bear Stearns, the US Fed's cut in its discount rate, and worries of recession in the American economy, noted Niraj Deewan, a market analyst with Quantam Securities.
Brokerage firm India Infoline said the worst was not yet over and the US Federal Reserve's action could just be an indication of how worse the credit crisis had turned out to be.
However, Sanjeev Patkar of Dolat Capital sees a silver lining behind the dark clouds. There will be some more pain in the short term. But it's not a bad time to start venturing into the market with long-term perspective, Potkar said.
Nonetheless, most analysts agree there are no immediate signs of recovery as global cues continue to worsen each passing day. There are less than 10 days of trading left in the current fiscal, which ends on March 31, 2008.
Following Monday's fall, the Sensex has gained only 13.3 percent over its level at the close of last fiscal ended March 31, 2007.
The prime index had gained over 15 percent in 2006-07 after the nearly 74 percent gain in FY06, 16 percent in FY05 and 83 percent in FY04.
Meanwhile, keeping in line with the market sentiments, the Indian rupee fell sharply to its lowest in six months on Monday, on concerns that foreign investors would withdraw liquidity from the market after local stocks tumbled to their worst in six months.
Foreign funds have been net sellers of $3.5 billion of Indian equities this year, after buying a record $17.4 billion in 2007 causing the rupee to appreciate more than 12 percent against the dollar.
The partially convertible rupee ended at 40.72/73, off an early low of 40.84, its weakest since Sept. 6.
Meanwhile, India's Finance Minister P. Chidambaram has advised the investors to remain calm and not react hastily.
The subprime mortgage market crisis will not directly affect us, because except one private sector bank, which has made its exposure, none of our public sector banks has any exposure to subprime mortgage market, Chidambaram said in his reply to a debate on the Budget 2008-09 in Rajya Sabha.
But, when crisis moved from sub-prime mortgage market to housing market, and now housing market to the credit market, there is impact upon India. There is impact in terms of credit flows and financial flows. But, at the moment, I believe that impact is second order impact and a moderate impact, he said.
As regards the stock markets, they take cues from developments in the US and Asian markets, he added. In fact, we now have to track what is happening in Asian markets. Hong Kong, Tokyo and Shanghai open before Indian market opens, and if you watch closely, you will find what is happening in Asian markets is impacting the Indian stock market, he said.
Elsewhere in the region, Karachi's 100-share index ended down 0.29 percent at 15,043.81 and Colombo's All-share index fell 0.89 percent to 2,543.18.
Stock markets across Asia also declined on Monday, with Japan's Nikkei closing at 11,787.51, down 3.71 percent - its lowest in 2 1/2 years.
In Hong Kong, the Hang Seng closed down 5.18 percent at 21,084.61.
South Korea's Kospi index fell 1.61 percent to 1,574.44 and Singapore's Straits Times Index took a 1.63 percent drop to 2,792.45.
China's Shanghai Composite Index was down 3.6 percent to 3,820.05.