(Source: The Times of India)
MUMBAI/NEW DELHI: 'Thank God it's Friday' could well have been the prevailing market sentiment as the sensex concluded the worst week in its history, shedding almost 2,000 points and wiping out investor wealth worth Rs 6.6 lakh crore in just four trading sessions. Unfortunately, there are enough ominous signs to suggest that there might be worse to come.
These include the dismal 1.3% rise in industrial production in August over the same period last year; the continued pressure on the rupee, which hit an all-time low of 49.30 in intra-day trading; a crisis of confidence which has turned banks wary of lending to each other (just as in the West), sending overnight call rates soaring to as high as 22%; and the continuing travails of the Dow, which plunged by a gravity-defying 1,000 points during Friday trading.
The silver lining is that oil prices fell below $82 a barrel, but that's due to fears of a global recession, which could hurt India too.
The worst shock came from the IIP figures, which rudely interrupted a brief sensex recovery and sent the 30-scrip index plummeting again to close 801 points or 7% lower, its seventh biggest single-day loss in history. The sensex was last seen at this level in August 2006. The day's trading left investors poorer by Rs 2.5 lakh crore.
Battered by speculation over the state of its finances, ICICI Bank plunged by over 25%, but concerted efforts by its top officials to reassure depositors that their money was safe helped shore up the stock a little.
The efforts of the finance minister to talk up sentiment after the Reserve Bank of India cut the cash reserve ratio by another 100 basis points had helped the sensex recover partially after losing over 1,000 points within minutes of opening. It had pulled back over 600 points, as encouraging news came in of the rate of inflation dropping to 11.80% from the previous week's figure of 11.99%.
Then, the index of industrial production (IIP) data was released, and suddenly all talk of Main Street being insulated from Dalal Street seemed frighteningly hollow. Investors panicked and the market fell again to end the week at 10,528, compared to its close of 12,526 the previous Friday. The rupee plummeted to an all-time low of 49.30 against the dollar before closing at 48.72, still at a five-year low.
In the morning, investors were greeted by news that world markets had once again tumbled following another beating for the Dow on Thursday. The Dow fell 678 points to close at 8,579, its first close below 9,000 since 2003. Japan's Nikkei - already reeling from a nearly 10% drop on Wednesday - slumped another 9.6% on Friday.
Hong Kong's Hang Seng fell 7.2%, while the Sydney index closed 8.3% lower.
