Sensex plummets on global rout…Nifty nosedives 200 points

Stock markets around the world got squeezed out with equities across the board rocked by relentless selling. The sentiment in India was hit hard by a worldwide selloff, notwithstanding the latest round of monetary easing by the US Federal Reserve.

The NSE Nifty suffered its biggest percentage fall since August 2009 while registering its biggest point fall since October 2008. The Sensex had its worst fall in more than a year.

The India Vix index shot up 22.5% in a single day, hitting 33.88 levels. The total turnover on the Indian bourse crossed Rs. 2 lakh crores while the advance-decline ratio was clearly in favour of the bears.



Even a material drop in Food Inflation in the second week of September and encouraging words about the Indian economy by the Finance Minister failed to sooth frayed nerves. A steep drop in the Indian rupee added to the sour mood as investors rushed to the safety of the US dollar.

Markets around the globe have taken a grim view of the Fed's so-called 'Operation Twist' after the US central bank warned of 'significant downside risks' from the worsening credit crisis in the eurozone. Also, three of the FOMC members dissented as they had done in the previous policy meeting.

A downgrade of three top US banks by Moody's and that of several Italian lenders by the S&P had a nasty effect on the mood in Asian markets.

Also hurting the undercurrent was indication of continued contraction in the Chinese factory output. A preliminary manufacturing PMI fell to 49.4 in September vs. August's 49.9, according to HSBC.

A preliminary eurozone composite PMI fell to 49.2 in September from 50.7 in August, the first contraction in private-sector activity across the 17-nation region in more than two years.

Separately, the Indian rupee slid to a new two-year low, falling below the 49 mark against the dollar on the back of persistent weakness in global equities and Asian currencies.

The Australian dollar fell though parity with the US dollar for the first time since March before recovering. The Dollar Index climbed to a seven-month high.

"The Fed’s ‘operation twist’ was expected to swing the mood in favour of the risky assets, but ended up doing the opposite. The debt-swap fell short of expectations. Downgrade of top three US banks coupled with downbeat PMI reports from China and the eurozone hit the sentiment across markets.

For India, the biggest negative was the slump in the Rupee below 49 per dollar. One has to see how the FIIs behave from here on and what steps policymakers take to stem the slide in the Rupee," says Amar Ambani, Head of Research, IIFL - India Private Clients.

Finally, the BSE Sensex ended at 16,361, plunging 704 points. It had earlier touched a day's high of 16,834 and a day's low of 16,316. It opened at 16,827. The NSE Nifty closed at 4,924, down 210 points.