Recession looming large

Key benchmark indices are likely to open weak mirroring global peers which witnessed a huge sell-off on renewed worries over a prolonged global economic recession, thereby ignoring the Reserve Bank of India’s 1% cash reserve requirement cut on late evening Wednesday, 15 October 2008 in a bid to boost liquidity. The SGX October 2008 Nifty futures were down 227.5 points.

Back home, the Reserve Bank of India (RBI) slashed its cash reserve requirement (CRR) for banks by 100 basis points to 6.5% with effect from 11 October 2008, whichwill release Rs 40,000 crore into the banking system to boost liquidity. CRR is the amount that banks park with the central bank. Among the other measures announced were the release of Rs 25000 crore to banks for a farm loan waiver scheme, doubling the cap on foreign investment in corporate debt to $6 billion from $3 billion as authorities sought to get money flowing through squeezed markets.

On 10 October 2008, RBI had cut CRR, by 150 basis points to 7.5% to infuse liquidity into the system. This included a 50 bps CRR cut on 6 October 2008.The cut injected liquidity to the tune of Rs 60,000 crore into the system.

Among frontline companies, HDFC Bank will declare their September quarterly results today, 16 October 2008.

US stocks plunged the most on Wednesday, 15 October 2008, since the crash of 1987 after the Federal Reserve Chairman Ben Bernanke said economic activity weakened across the United States in September 2008 as businesses rethought capital investments, and consumers curtailed spending. Fed Chairman acknowledged the US economy faced a significant threat and global efforts to unlock credit markets would not prevent recession.

The Dow Jones Industrial Average slumped 733.08 or 7.9% to 8,577.91, its second-biggest point drop ever. The Nasdaq Composite Index lost 150.68, or 8.5%, to 1,628.33 and the Standard & Poor's 500 Index sank 90.17 points, or 9%, to 907.84.

Asian markets declined sharply today, 16 October 2008 on global recession concerns. China's Shanghai Composite slipped 3.62% or 72.19 points at 1,922.47, Hong Kong's Hang Seng tumbled 5.77% or 923.24 points at 15,075.06, Japan's Nikkei plunged 9.55% or 911.91 points at 8,635.56, Singapore's Straits Times dropped 5.48% or112.78 points at 1,946.61, South Korea's Seoul Composite fell 6.81% or 91.26 points at 1,249.02 and Taiwan's Taiwan Weighted lost 3.11% or 163.30 points at 5,082.96

Back home, the BSE 30-share Sensex ended 674.28 points or 5.87% lower at 10,809.12 and the S&P CNX Nifty ended down 180.25 points or 5.12% to 3,338.40 on Wednesday, 15 October 2008 on worries over liquidity conditions in the financial system and weak global markets.

Foreign institutional investors (FIIs) were net sellers worth Rs 1030.79 crore while mutual funds bought shares worth Rs 669.96 crore on Wednesday, 15 October 2008, according to provisional data on NSE.