Sensex recovers from 13.1k; Re and crude crash

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The Sensex plunged to its lowest level in a month, crude oil fell past $95 a barrel, and the rupee pierced 46 against the dollar after Lehman Brothers Holdings Inc filed for bankruptcy and Merrill Lynch was sold out to Bank of America, deepening a global financial crisis. US, European and Southeast Asian stocks tanked as fears about the stability of other US financial institutions spooked investors.

The 30-share Sensex reacted sharply in early trades to dip 850 points. The index recouped 380.46 points from the day’s low to end at 13,531.27, that still left a loss of 469.54 points, or 3.4%, its lowest since July 17. Shares recovered some losses after China reduced interest rates, its first in six years, and cut reserve requirements for banks.

The S&P CNX Nifty of the National Stock Exchange (NSE) breached the crucial 4,000-level but short-covering pared the loss to 155.55 points, or 3.68%, to end at 4,072.90 points. This is the Nifty’s biggest decline since July 15. Stocks tumbled on fears of more selloff by foreign institutional investors (FIIs) amid uncertainty in the global financial market.

The losses in the stock market and the heavy demand for dollar from importers sent the rupee past 46 against the dollar for the first time in two years. Dealers said the Reserve Bank of India intervened in the market, selling dollars through state-run banks to halt the rupee’s sharp fall, but that did not help much, as the quantum of selling was not too large. The currency ended at 46.05/06 against the dollar, after hitting a low of 46.08, its weakest since September 20, 2006. It was 0.65% weaker than Friday’s close of 45.75/76. The rupee slumped on concern investors will dump riskier assets, including emerging-market securities.

Crude oil prices also fell to a seven-month low after Lehman Brothers Holdings Inc filed for bankruptcy and refineries along the Gulf of Mexico escaped major damage from Hurricane Ike. Metals and crops also dropped, prompting a 5% slump in the S&P GSCI Index of 24 commodities. Crude oil for October delivery declined $7.05, or 7%, to $94.13 a barrel in electronic trading on the New York Mercantile Exchange. That’s the lowest since February 14. Lehman Brothers was suspended from energy and commodities trading in London.