Crash Course: Sensex Down 704 Points on Depressed Global Cues

Andrew L D'Cunha

Mumbai, Sep 22: Markets fell sharply as investors reacted in very negatively to the U.S. Federal Reserve policy decision and grim economic growth. The Nifty plunged 210 points, at 4,923 and the Sensex declined 704 points, at 16,361. Jaiprakash Associates (-9.80%), DLF (-7.84%), Sterlite Industries (-7.49%), Reliance Industries (-6.87%) and Tata Motors (-5.89%) were the major Sensex losers.   The Nifty dropped below the psychological level of 5,000. The BSE Mid Cap and BSE Small Cap indices were also trading extremely weak and both closed lower by over 3%.

On Wednesday, Fed announced its plan to buy long-dated Treasury securities and sell the same amount of securities with shorter maturities, which it has called Operation Twist. But the central bank also cited “significant downside risks to the economic outlook,”

The dollar climbed to a seven-month high against major currencies after the Federal Reserves announcement. The rupee fell more than 1.9 percent on Thursday to its lowest in more than 26 months. The partially convertible rupee was at 49.25/26 per dollar, after hitting 49.2650, its weakest since July 13, 2009..

Meanwhile, India's food inflation eased to 8.84 per cent for week ended September 10 against 9.47 per cent a week ago. Fuel price index climbed to 13.96 per cent as compared to 13.01 per cent. The primary articles index was at 12.17 per cent compared to 13.04 per cent a week earlier.

In Asia, Hong Kong’s Hang Seng, plunged 4.9%, while the Shanghai Composite fell 2.8%,  Japan’s Nikkei ended down 2.1%, while South Korea’s Kospi dropped 2.9%. European stock markets fell sharply on Thursday, with banks, mining and oil stocks hit hard in the wake of a bond-swap program announced by the U.S Federal Reserve.

Gold fell back nearly a percent on Thursday afternoon. Global spot gold slipped under the weight of a rallying dollar. However a weaker rupee capped the downside,  Wednesday afternoon, the most-active gold for October delivery on the Multi Commodity Exchange  was 0.81 percent lower at 27,914 rupees per 10 grams, after falling to a low of 27,860 rupees. The rupee plays an important role in determining the landed cost of the yellow metal.