Fall steepest in two months

The Sensex today registered its biggest one-day fall by points since 12 December 2006.

On this day, the barometer index had lost 404.41 points (3%) after data showed a lower-than-expected 6.2% growth in industrial production for October 2006, sparking concerns of an economic slowdown. The 404-point slide came on the back of a 400-point fall a day before (11 December 2007) caused by the Reserve Bank of India (RBI)’s surprise hike of 50 basis points in the cash reserve ratio (CRR) after trading hours on 8 December 2006.

The Sensex today plunged 348.20 points (2.39%) to settle at 14,190.70. Data showing substantial FII inflow of Rs 560 crore in index-based futures on 9 February 2007, concerns about rise in interest rates and weak Asian markets spooked the bourses. Data released on 9 February 2007 showed that wholesale price index rose 6.58% in the 12 months to 27 January 2007, the biggest rise in more than two years fanning concerns of a further rise in interest rates.

Another major fall happened on 19 December 2006, when the Sensex had lost 349.08 points (2.54%) in a sell-off across Asian emerging markets after Thailand’s central bank adopted currency controls, heightening worries about emerging markets.

A sharp market fall was also witnessed early January 2007, when the Sensex had lost 652.76 points (4.6%) in five trading sessions, to 13,362.16 on 10 January 2007 from 14,014.92 on 3 January 2007. Caution before the start of the Q3 earnings season was behind the fall.

The current market fall has materialized after a solid surge that took the benchmark to all-time highs. From 14,090.92 on 31 January 2007, the Sensex had spurted 561.17 points (3.9%), to a lifetime closing high of 14,652.09 on 8 February 2007. Strong Q3 results and the stepping up of buying by FIIs, following an upgrade in India’s rating to investment grade by Standard & Poor's, triggered this solid surge.

The market-breadth was extremely weak today. For 2,312 shares that declined on BSE, 334 rose. Just 27 stocks were unchanged. Losers outpaced gainers by a ratio of nearly 7:1.