Sensex hits 3-month low

Yen, Fed rate cut to breathe life into markets; rupee expected to strengthen.

Stocks grazed a three-month low in gyrating trade on Friday, sending the Sensex to its worst weekly loss in five months.

But analysts said the weakening of the yen following the Federal Reserve’s decision to cut the discount rate would have a stabilising effect on Indian markets next week.

The Sensex ended at 14,141.52, down 216.69 points, or 1.51 per cent, from yesterday.

The outlook for all global markets, however, appears positive after the Fed reduced by 50 basis points the rate at which it gives direct loans to banks.

This is the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S Bernanke’s first as Fed chairman.

The Dow was up 167.21 points at 13,012.99(at the time of going to the press) after the Fed’s surprise move, while the FTSE ended 205.3 points, or 3.5 per cent, higher at 6,064.2 indicating a rebound in global markets next week.

The Indian markets yesterday fell sharply in initial trade but short covering in post-noon trades and recovery in other Asian and European markets helped shares to regain more than 400 points from the day’s low.

Still, a third of the stocks on the Bombay Stock Exchange (BSE) were in the red, after foreign funds sold another Rs 3,536 crore worth stocks on Friday, to add to yesterday’s Rs 3,108 crore sales.

Total sales by foreign institutional investors (FIIs) for August have now touched Rs 11,820 crore (nearly $3 billion), beating last May’s net sales figure of Rs 11,558.57 crore ($ 2.81 billion).

But domestic institutions made a record net purchase of Rs 5,957 crore this month, beating its previous single biggest purchase in a month of Rs 4,560 crore in June.

The Nifty ended the day at 4108.05, down 70.55 points, or 1.69 per cent.

Yesterday’s weakness, coming after yesterday’s rout on reports that the biggest mortgage lender in the US, Countrywide Financial Corporation, was on the brink of bankruptcy, may not persist for long, as newer funds might see values in markets such as India soaring after a fall of nearly 12-13 per cent from the peak, said experts.

The broader S&P CNX Nifty ended the day at 4108.05 points, down 70.55 points, or 1.69 per cent. Nifty futures for August delivery fell 1.4 per cent to 4,082.

Infosys Technologies tumbled by 2.91 per cent to Rs 1,854.80 a share on fears that the housing slump in the US will curb consumer spending. Satyam Computers (down 5.81 per cent to Rs 440.20 a share), Tata Steel (down 5.40 per cent to Rs 544.30 a share) and ONGC (down 4.41 per cent to Rs 782.70 a share) were the top losers.

“We do not know the extent of the damage. With over Rs 3,000 crore worth of net sales by foreign institutional investors yesterday, the markets cannot rebound in a day,” said a research head of a brokerage.