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Sensex falls to 3-month low on US job data

Dips below 16K; Reliance hits 52-week low.


Our Bureau

Mumbai, Feb. 5

The poor US job data published on Thursday had its ripple effect thousands of miles away here in India where it sent stocks plummeting to a three-month low on Friday.

The benchmark Sensex sank below the 16,000-mark for the first time since November 2009, crushing the optimism that had set in during early January this year when it was at its 12-month high of 17,790. From then to its Friday close, the index has fallen more than 11 per cent.

On Friday, it dipped 434 points or 2.63 per cent to close at 15,790.93. The Sensex opened at 16,222 and fell almost continuously right to the end of trade. The Nifty fell 2.61 per cent to 4,718.65. Reliance Industries, the heaviest Sensex stock by weightage, touched its 52- week low of Rs 975 a share.

All the major global equity markets were trading in the red on Friday. "The US job data led to a powerful pull-back in the markets there last night," said Mr Saurabh Mukherjea, Equity Head of Noble group (India), the India arm of the British investment bank. The Dow was down 2.61 per cent and the Nasdaq 2.99 per cent on Thursday.

It was the FIIs again that brought the markets down here, their net sales on Friday at Rs 1,726.7 crore, taking their February net sales up to Rs 2,435.7 crore.

"With added worries coming in from Europe, FIIs are getting out of risky (overvalued) markets such as India," explained Mr Jagannadham Thunuguntla, Head of Equity at SMC Capitals.

Most of the selling on Friday took place in the metal, realty and auto stocks. Metal stocks were sold because of the dollar rise and the fall in gold. Even sugar stocks were shed on reports of increased production in Maharashtra.

UNWINDING $ CARRY TRADE

There is quite a bit of unwinding of dollar carry trades (borrowing in dollar at low interest rates and investing in elsewhere in high yield markets), said Mr Thunuguntla. "This is leading to more selling by FIIs," he added.

As some investors sold, more and more joined the herd. "Investors need some sort of a cue to book profits as a lot of them are sitting on a lot of gains due to the rally seen last year," said Mr Ashu Madan, President- Equity Broking at Religare Securities.

Domestic institutions were net buyers for Rs 1,168.98 crore on Friday. Retail investors were net sellers for Rs 9.73 crore on the BSE. Mr Thunuguntla said that retail investors have remained very wary of the markets as they burnt their fingers very badly in the crash of 2008.

Mr Ravi B, a retail investor from Bangalore, reflects this wariness. He said it was becoming increasingly difficult for him to predict which way the markets will go. "To be on the safer side I did sell a few of my shares to book profits before it is too late," he added. All the major sectoral indices on the BSE ended the day in the red, with the realty, metal and PSU indices leading the fall. On the BSE, 81.6 per cent of the scrips (2368) fell, whereas only 487 advanced.

Tata Power was the sole gainer among the Sensex scrips; it was up marginally by 0.8 per cent. Hindalco, Tata Steel, ONGC, Jai Prakash Associates and Mahindra and Mahindra were among the biggest losers of the day among the benchmark stocks.

It was not just the equity markets which fell on Friday, the commodities markets too took a beating. One of the reasons being again, the US job data as America is one of the biggest consumers of commodities, said the head of a broking firm.

According to data on Bloomberg, crude oil was down 0.6 per cent at $72.7 a barrel and gold was down 1.01 per cent at $1052.3 per ounce. "Investors are not just booking profits in the equity markets but across asset classes," said Mr Madan.

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