This week the bulls got thrashed.
Barring Thursday (Feb 19) when the market closed higher, all the other days saw the Sensex slump. The previous Friday (Feb 13), the Sensex closed at 9634.74 and today (Feb 20), it closed at 8843.21.
News reports said that CLSA cut the EPS estimates of large caps (Tata Steel, Hindalco, RIL, ICICI Bank, SBI, Punj Lloyd) as well as the Sensex’s FY09 and FY10 EPS estimate, which contributed to the low sentiment. The firm said that it sees the 2009-end target for the Sensex at 11000.
The reasons for the poor market performance during the week were varied. The disappointment with the interim budget was what flagged off the week coupled with a worrying fiscal deficit. But it was global sentiment that was fuel for the bears.
Japan is grappling with its worst economic crisis since the end of World War II. Britain was warned it faces the worst recession in almost 3 decades. The G7 offered no solution to revive global growth. Commodity prices sank this week and crude oil tumbled below $35/barrel.
Obama’s signing of the economic stimulus plan worth over $787 billion did not boost global sentiment. On Thursday, U.S. stocks slipped with the Dow Jones touching a 6-year low after Hewlett-Packard cut its profit forecast and concerns about rising credit-card defaults, dragging financial shares to the lowest level since 1995.
What’s dragging stock markets down globally is the awareness and probably, even the acceptance, that this recession is going to be long and deep. Much more than what was thought of earlier, at least.
