Sensex down nearly 20% in seven trading sessions

The market tumbled for the second day in a row today as margin calls created havoc on the bourses. Though the market ended sharply down, it came off lower level after a huge intra-day fall. With today’s fall the market has now been declining for seventh consecutive session.

Earlier today, market wide circuit filters were applied after an intra-day 10% fall occurred in key benchmark indices in minutes of commencement of trade. Trading on the bourses was halted for one hour as the 10% market wide circuit filters were applied after the sharp fall. Trading resumed at 10:55 IST.

The market came off lower level in mid-afternoon trade as European markets recovered with major markets regaining positive zone. However stocks tumbled across Asia today as panic gripped markets that a US recession could derail global economic growth, sending investors fleeing to safe-haven government bonds.

The BSE Sensex lost 875.41 points or 4.97% to 16,729.94. Sensex hit a low of 15,332.42 in mid-morning trade. At the day's low, Sensex had lost 2273.93 points. It oscillated in a wide range of 1736.15 points for the day amid intense volatility. Sensex hit a high of 17068.57 in the day.

With today’s fall, the BSE Sensex has lost 4,097.51 points or 19.67% in just seven consecutive sessions from a recent high of 20,827.45 on 11 January 2008. The S&P CNX Nifty has lost 1300.80 points or 20.98% from 6200.10 on 11 January 2008.

Sensex is now down 4476.83 points or 21.11% from its record high of 21,206.77 hit on 10 January 2008. The S&P CNX Nifty is down 1457.80 points or 22.93% from all-time high of 6,357.10 hit on 8 January 2008.

The fall has been even steeper in small-cap and mid-cap indices. The BSE Mid-Cap index has shed 3043.56 points or 29.70% from a record high of 10245.81 hit on 8 January 2008. The BSE Small-Cap index has lost 4210.85 points or 29.57% from a record high of 14239.24 hit on 8 January 2008.

Nifty lost 309.50 points or 5.94% today to settle at 4,899.30. At the day’s low of 4,448.50, the Nifty lost 760.30 points for the day. Nifty January 2008 futures were at 4,920, a premium of 20.70 points as compared to spot closing.

Turnover in National Stock Exchange’s futures & options segment slumped 46.12% to Rs 44307.58 crore from yesterday’s turnover of Rs 82241.65 crore

The BSE Mid-Cap index lost 8.62% to 7,202.25 and the BSE Small-Cap index slipped 8.09% to 10,028.39. Both these indices underperformed the Sensex

All the sectoral indices on BSE registered steep losses today. BSE FMCG Index (down 7.96% at 2,000.17), BSE Power Index (down 6.22% at 3,590.83), BSE Realty (down 9.15% to 9,520.84), BSE Metal index (down 5.68% at 14,114.03), BSE PSU index (down 7.74% to 7,961.77), BSE Health Care index (down 6.09% at 3,476.31), BSE Oil and Gas index (down 10.05% at 9,974.78), BSE Consumer Durables index (down 7.99% to 4,924.03), underperformed the Sensex

BSE TecK index (down 3.58% to 3,099.41), BSE Auto index (down 4.05% at 4,475.56), Bankex (down 4% to 10,158.35), BSE Capital Goods index (down 3.72% at 16,452.73), BSE IT index (down 3.63% to 3,443.59), outperformed the Sensex

Margin calls, both by brokers to investors and by exchanges to brokers, added to the selling pressure after a two-day carnage in share prices. Brokers would not let clients make new purchases until margins were topped up on existing trades, and the exchanges also called margins due from brokers.

Margin trading is where investors trade shares without paying the full cost of the share. Instead a margin or percentage is paid as collateral, and when the market moves against the investor, the margin needs to be topped up. If the investor does not make payment, the shares can be sold by the broker. A margin call is also triggered when shares that an investor had bought with borrowed money decrease in value. If the investor is not able to put up additional margin, the broker/financer will resort to sale of shares.

Sensex had tumbled 1408.35 points or 7.41% to 17,605.35 on Monday, 21 January 2008, hit by setback in Asian stocks, FII selling and margin calls.

Finance Minister P Chidambaram today said the fundamentals of the economy are strong and liquidity will not be a problem. Chidambaram said there was no reason at all to allow the worries of the Western world to overwhelm us. Our economy is very different from some developed economies which are facing some stress, he said.

The finance minister further stated that Reserve Bank of India as well as banks will provide enough liquidity to brokers and other market players, adding that liquidity will not be an issue.

The total turnover on BSE was quite low today probably as many brokers were unable to trade in the morning as their terminals were shut due to non-payment of margins to the exchange. BSE clocked a turnover of Rs 6846 crore as compared to Rs 9336 crore yesterday, 21 January 2008.

The market breadth was extremely weak on BSE. On BSE, 2264 declined as compared to just 162 that rose. 26 shares remained unchanged.

Among the 30-member Sensex pack, 26 declined while the rest gained. In opening trade, all the 30-members of Sensex pack were in red.

India’s largest oil exploration company in terms of market capitalisation Oil & Natural Gas Corporation plunged 12.48% to Rs 975 on 7.48 lakh shares. It was the top loser from Sensex pack. The stock recovered sharply from day’s low of Rs 850.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries was down 7.62% to Rs 2350.35, off sharply from day’s low of Rs 2120. 18.89 lakh shares were traded on the counter

ICICI Bank, the country’s largest private sector bank in terms of net profit, was down 3.68% to Rs 1130, off session's low of Rs 1005.55.

HDFC Bank slumped 3.13% to Rs 1470. It registered 45.2% rise in net profit to Rs 429.36 on on 59.70% rise in total income to Rs 3405.79 crore in Q3 December 2007 over Q3 December 2006. The results were announced after trading hours on Monday, 21 January 2008.

ITC (down 10.50% to Rs 182), Ambuja Cements (down 10.22% to Rs 114.15), and Hindalco Industries (down 11.42% to Rs 147), were the other losers from Sensex pack

Grasim Industries fell 6.11% to Rs 2840 despite reporting 34.55% rise in net profit to Rs 553.79 crore on 15.93% rise in total income to Rs 2694.96 crore in Q3 December 2007 over Q3 December 2006. The results were announced during trading hours today, 22 January 2008.

Bharti Airtel surged 3.24% to Rs 855.10 and was the top gainer from Sensex pack. The stock recovered sharply from day’s low of Rs 700.

Infosys Technologies (up 2.14% to Rs 1420), Reliance Energy (up 1.35% to Rs 1800), and Bajaj Auto (up 0.75% to Rs 2080), were the other gainers from Sensex pack.

Reliance Industries was the most active counter on BSE with turnover of Rs 440.50 crore followed by Reliance Petroleum (Rs 413.50 crore), Reliance Natural Resources (Rs 404 crore), Reliance Energy (Rs 368 crore) and ICICI Bank (Rs 175 crore) in that order

Reliance Natural Resources led the volume chart on BSE clocking total volume of 3.73 crore shares followed by Reliance Petroleum (3.09 crore shares), Ispat Industries (2.33 crore shares), IFCI (2.20 crore shares) and Tata Teleservices (Maharashtra) (1.45 crore shares) in that order

Select side counters managed to outperform the falling markets. They were, Yuken India (up 20% at Rs 324.10), Amara Raja Batteries (up 20% at Rs 223.65), EIH Associated Hotels (up 20% at Rs 177), Milkfood (up 10% at Rs 361.40), and Greenply Industries (up 19.58% at Rs 390), surged

However, Info Edge Solutions (down 29.88% to Rs 880), Omaxe (down 28.89% to Rs 229.05), Peninsula Land (down 28.11% to Rs 72.50), Reliance Natural Resources (down 26.58% to Rs 116), and Kalyani Steel (down 24.50% to Rs 300), slumped

The SpiceJet counter saw hypervolatility today. It was down a whopping 43.48% at one point of time to day’s low of Rs 44. However it settled 0.39% higher at Rs 78.15 on total volumes of 39.94 lakh shares

Lupin declined 6.92% to Rs 500. It reported 203.90% jump in net profit to Rs 170.28 crore on 46.14% rise in total income to Rs 747.05 crore in Q3 December 2007 over Q3 December 2006.

Sterlite Technologies tumbled 30.42% to Rs 160. It reported 105.1% rise in net profit to Rs 26.40 in on 59.70% rise in net sales to Rs 3405.79 crore in Q3 December 2007 over Q3 December 2006.

Godrej Consumer Products declined 9.46% to Rs 101.50. The company said it has entered into an agreement for acquiring the Kinky hair brand business, one of the leading brands in the South African hair business, which is a 36-year-old business set up by a family of entrepreneurs in South Africa.

i-flex Solutions declined 17.53% to Rs 925 even as it reported 1346.59% rise in net profit to Rs 110.78 crore on 949.57% spurt in total income to Rs 456.74 crore in Q3 December 2007 over Q2 September 2007.

Corporation Bank declined 1.38% to Rs 375 despite reporting 30.38% rise in net profit to Rs 190.9 crore on 23.18% rise in total income to Rs 1265.83 crore in Q3 December 2007 over Q3 December 2006.

Among the BSE ‘A’ group stocks on BSE, public sector lender Indian Bank soared 8.07% to Rs 201.50 and topped gainers in the BSE’s A group shares. Kotak Mahindra Bank (up 4.17% to Rs 1,009.55), Finolex Cables (up 3.13% to Rs 92.40), Nirma (up 2.82% to Rs 197) and Pfizer moved (up 2.77% to Rs 659.95) were the other gainers in that order.

Buying from insurance firms and mutual funds has supported the market at declines in recent months. But the recent carnage on the street may, in fact, cause redemption pressure for mutual funds. This may accentuate fall on the bourses.

Insurance firms have been raising lots of funds through unit-linked insurance plans with high weightage for equity. The money is being pumped in the secondary market. It now remains to be seen whether the investors in a unit-liked insurance plan (ULIP) stick to a plan with high exposure to equity if the market continues to remain weak. Insurance companies provide ULIP investors an option to switch over to debt funds from equity funds with certain restrictions.

Some of the foreign institutional investors (FIIs) recently registered with the market regulator Securities & Exchange Board of India (Sebi) may start buying at declines. Since Sebi’s restrictions on participatory notes in October 2007, 134 new FIIs have been registered with Sebi, taking their total tally to 1,259.

European markets staged a solid intra-day recovery today on rumors of a concerted rate cut by the US Federal Reserve, the European Central Bank and Bank of England. The FTSE 100 index of United Kingdom was up 0.44% to 5,603 after a sharp early fall. France’s CAC 40 index was up 0.19% to 4,753.31. However Germany's DAX index declined 2.27% to 6,636.11

Meanwhile, the Bank of Japan (BoJ) voted unanimously to keep interest rates on hold at 0.5% on Tuesday, 22 January 2008 saying the economy was weaker than it had forecast in October owing to a sharp drop off in housing investment.

Hong Kong's Hang Seng (down 8.65% at 21,757.73), Japan's Nikkei (down 5.65% at 12,573.07), Taiwan's Taiwan Weighted (down 6.51% at 7,581.95), China's Shanghai Composite (down 7.22% to 4,559.71) and South Korea's Seoul Composite (down 4.43% at 1,609.02), declined.

US stock markets were closed on Monday, 21 January 2008 in observance of Martin Luther King Day.

The US economy has been hit hard by rising defaults in the sub-prime mortgage sector in which Americans with bad credit records are struggling to pay back housing loans given to them during the housing boom.

US president George Bush on Friday, 18 January 2008, called for a package of tax cuts and other measures totaling around 1% of US gross domestic product, or up to $150 billion, after weak recent reports on employment, retail sales, factory activity, and housing construction this month suggested the United States -- the world's largest economy --may be heading into recession. Under consideration in the package announced by Bush are ideas like tax rebates, incentives for businesses, and extensions of unemployment insurance.

Crude oil prices fell on Tuesday, 22 January 2008 on mounting concerns that the U.S. economy may be heading into a recession that would likely dampen crude demand. Light, sweet crude for February delivery fell $2.22 to $88.35 a barrel in electronic trading on the New York Mercantile Exchange in Singapore. In London, Brent crude futures for March delivery fell 16 cents to $87.35 a barrel