Market may extend Monday's sharp losses tracking subdued global cues

The key benchmark indices may extend Monday's (17 August 2009) heavy losses tracking weakness in most of Asia and slump in US stocks on Monday. The concerns over poor progress of India's annual monsoon will remain.

Global sell-off after a disappointing US consumer sentiment report reigniting concerns about the global economic recovery triggered a sharp sell-off on the domestic bourses on Monday, 17 August 2009. The BSE 30-share Sensex fell 626.71 points or 4.07% at 14,784.92 on Monday.

As per the provisional figures on NSE, foreign funds sold shares worth Rs 1226.49 crore and domestic funds bought shares worth Rs 460.32 crore on Monday.

The monsoon situation remains grim with the country heading into the worst drought year over the last two decades. Monsoon was 56% below normal in week to 12 August 2009 and was 72% below normal in the soyabean growing central region in past one week, India Meteorological Department (IMD) said on 13 August 2009. Monsoon rains were 29% below normal during the period from 1 June 2009 to 12 August 2009. However, India's weather office has ruled out an early withdrawal for this year's monsoon which has still one and half months to complete its full journey. The progress of monsoon is closely watched as more than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.

India reportedly aims to raise planting of winter-sown crops and improve irrigation to make up for the damage to farms and to try to counter rising food prices after poor monsoon rains hurt crops such as rice and sugarcane.

Most Asian stocks fell today, amid concern the global economic recovery will fail to meet investors' expectations.The key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan fell by between 0.14% to 1.45%. But Japan's Nikkei Average rose 0.38%.

The Shanghai Composite Index lost 0.78%, extending yesterday's 5.8 % slump, which was the steepest since November 2008.

The US markets plunged more than 2% on Monday, 17 August 2009 in its worst single-session percentage loss in six weeks.The Dow plunged 186.06 points, or 2%, to 9,135.34. The S&P 500 index fell 24.36 points, or 2.4%, to 979.73. The Nasdaq fell 54.68 points, or 2.8%, to 1,930.84.

The selloff came despite some encouraging economic news. Investors were uninspired by the news that the empire state manufacturing index moved into positive territory, signaling growth for the first time since April 2007. The reading came in better than expected at 12.08.

In more economic news, the Fed and treasury opted to extend the term asset-backed securities lending facility or the talf.