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Markets Turn Deeper in Red

Crashing markets sent SEBI and RBI into action but brought no respite in reactions

This was undoubtedly the worst week for the Indian as well as the US stock markets, so far in 2008. The BSE Sensex ended the week, 15 per cent down over last Friday’s close.

After ending in the negative zone on Friday (3 October), the markets continued their falling streak on Monday. The BSE Sensex plunged below the 12000 mark to close at 11801. The NSE Nifty also slipped by 215 points to close at 3602. All of the 30 companies on the BSE Sensex ended in the red. The major losers which dragged the Sensex down were Reliance Industries, L&T, Infosys and HDFC.

On the commodity front, the prices of crude oil slipped while the gold prices rallied.

On Monday, both RBI and the regulator SEBI flung into action to provide some respite. SEBI lifted up some of the restrictions on the participatory notes while the RBI announced a cut of 0.5 percentage point in the CRR.

This brought some temporary respite as the markets opened on a positive note on Tuesday but later slid down to close lower than the previous day. The BSE Sensex ended 106 points lower to close at 11,695 and the NSE Nifty index ended flat at 3,606. 16 of the 30 companies on the BSE Sensex ended in the red. L&T, HDFC Bank, ITC and TCS were among the major losers which pulled the Sensex down.

The worst hit sectoral indices on the BSE were the BSE Capital Goods index and the BSE IT index.

Both oil and gold prices went up on Tuesday.

Sharp decline in the US and Asian markets led the Indian markets to a negative start on Wednesday. By the mid-afternoon trade the markets recovered some of its early losses but still the BSE Sensex ended 366 points lower to close at 11,328 and the NSE Nifty ended 92 points down at 3,513.

Friday was the worst day of the week. While the U.S. market opened sharply down and touched their lowest in five and-half years, the Indian market also followed suit. The troubled FIIs pulled out a whopping Rs 2513 crore from the Indian market which led the Sensex to fall nearly 7% from the previous day’s close. The day was full of gyrations. The Sensex opened the day at 10, 632 and from there it went as high as 10,904 and hit a low of 10,240 to finally close at 10,528. The broader Nifty closed at 3,280 points, down 6.65%.

The major losers that dragged the Sensex down were Reliance Communications, ICICI Bank and Reliance Infrastructure.

ICICI Bank saw its share fall 28 per cent during intra-day trade on Friday to touch a low of Rs 326.7 and finally closed the day at 364.10, down 20%.

The RBI in its attempt to provide some relief to the distressed state of the market, announced a further cut of one percentage point in the CRR. How much respite this move can provide is yet to be seen. Let’s wait and watch what the next week has in store.