Oommen A. Ninan
Spain's move to take over ailing bank triggers a fall world over
MUMBAI: Global markets and Europe's common currency euro slumped on Tuesday as the European Union and its member nations struggled to save their economies as well as euro from a downward spiral. A nearly $1 trillion rescue package has done little to check the fall, though the euro recovered some lost ground last week.
The dollar, seen as a safe haven from Europe's debt worries, gained one per cent against the euro and British pound sterling. The euro briefly traded below $1.22, erasing most of the recovery from last week's four-year low.
Indian stocks which halted its rally few days back, taking a cue from the global markets, tumbled on Tuesday by a steep 447.07 points on the Bombay Stock Exchange (BSE) to 16022.48. A broader S&P CNX Nifty of the National Stock Exchange lost 137.20 points or 2.78 per cent at 4806.75.
Italy was the latest euro zone country to announce a three-year austerity plan worth 24 billion euro on Tuesday. The pan-European stock index fell 2.8 per cent to its lowest level since early September, led by banking stocks. In Europe, U.K.'s FTSE 100 lost 146.68 points or 2.89 per cent at 4922.93.
In Asia, Japan's Nikkei was down by 298.51 points or 3.06 per cent at 9459.89 and Hong Kong's Hang Seng index crashed by 682.26 points or 3.47 per cent at 18985.50.
In India, metal stocks led the fall (5.10 per cent) followed by consumer durables (4.45 per cent), consumer goods (3.09 per cent) and banks 2.62 per cent. All sectoral indices ended in the red.
The Sensex closed at a three-month low on panic selling by funds mirroring weak world markets, which were spooked by reports of a bank failure in Spain.
The BSE 30-share index dropped 509.40 points in intra-day to trade below the 16000-level.
It finally settled at 16022.48, down 447.02 points, or 2.71 per cent. The last time it closed at this level was on February 15.
Analysts said Spain's move to take over an ailing savings bank CajaSur gave rise to fresh concerns over the euro zone debt crisis and triggered a fall in world stocks. “Spain's move to nationalise CajaSur and tension between South Korea and North Korea have further weakened investor sentiment and the correction in market is likely to continue for the coming sessions,” CNI Research CMD Kishore P. Ostwal said.
European stocks were trading in deep red, with Britain's FTSE 100 sinking nearly three per cent. Overnight, U.S. indices also ended lower, with S&P 500 dropping 1.29 per cent.
“In the domestic market, investors are already cautious ahead of Thursday's derivative settlement and in this situation any bad news from global markets can drag the indices,” Ashika Stock Brokers Research Head Paras Bothra said.
Reliance Industries, which holds the maximum weight among Sensex scrips, lost 3.39 per cent to close at Rs. 986.85. In BSE-30, only Cipla managed to settle in the green.
Reliance Communications plummeted by 6.32 per cent to Rs. 138.55, the biggest loser in the Sensex constituents.
L&T retreated by 4.28 per cent to Rs. 1,558.50 and Infosys by 2.44 per cent to Rs. 2,533.30.
Brokers said overseas institutional investors were selling shares persistently that had led the benchmark index to fall 9 per cent so far this year.
Other losers in the Sensex component are: SBI at Rs. 2,154.60 (3.94 per cent), ICICI Bank at Rs. 809.40 (2.72 per cent), HDFC at Rs. 2,607.75 (2.11 per cent) and ITC at Rs. 260.80 (2.80 per cent). Among metals, Hindalco dropped by 5.43 per cent to Rs. 137.70, Tata Steel by 4.45 per cent to Rs. 478.65 and Sterlite Industries by 4.49 per cent to Rs. 607.80.