Global market retreat persists

Written by Markets Bureau | Mumbai | Updated: Apr 29 2009, 06:55am hrs
Indian equity markets tumbled on Tuesday, together with their global peers, following reports that Citigroup and Bank of America have been urged by the Federal Reserve to infuse billions of dollars in additional capital after the recent stress tests. This stoked fresh fears among market participants about a deepening crisis in the world financial system.

Earlier, markets had hoped for a revival after senior executives of both banks stated that their operations for the first two months of the current calendar year were profitable. Reports also said the Federal Reserve will have determined that other banks might also need more capital.

Moreover, growing fears about the economic impact of the swine flu outbreak further dampened investor sentiment. The new strain of the virus that has killed at least 149 people in Mexico spread to more countries on Tuesday, raising the spectre of a pandemic.

The 30-share Sensex of the BSE lost 370.10 points, or 3.25%, to close the day at 11,001.75 points after touching an intra-day low of 10,961.76 points. The broader S&P CNX Nifty of the NSE was down 107.65 points, or 3.10%, to end the day at 3,362.35 points.

A combination of global and domestic factors prompted investors to book profits, said Mirae Asset Global head of equity Gopal Agrawal. Since March 9, we have seen domestic equity markets rallying higher with good returns. Reports of US regulators asking

Citigroup and Bank of America to infuse fresh capital raised concerns among investors, prompting them to sell equities and book profits, he added.

According to provisional figures provided by the BSE, FIIs were net sellers of equity worth Rs 256.85 crore, while domestic institutional investors sold Rs 202.15 crore in equity on Tuesday.

Also casting a shadow over domestic equity markets was nervousness ahead of the expiry of future & option contracts, which has been advanced by a day to Wednesday instead of Thursday due to a market holiday on account of voting in Mumbai on April 30 for the parliamentary elections.

Said Elara Capital director & country head-broking Vipul Dalal: The expiry of the April derivative series prompted investors to unwind their long positions and book profits. Concurred Angel Stock Broking fund manager & derivative analyst Siddarth Bhamre, Investors are unwinding their long positions in individual stock futures. This is the main reason why Indian markets fell more than other markets.

All the BSE Sectoral indices ended the day in the red, with the BSE Bankex, Metal and Realty being the major losers. The market breadth remained weak with 1,807 stocks ending the day deep in the red, compared with 654 stocks that advanced.