Uncertainty surrounding the enormity of the subprime crisis in the US mortgage market and its potential impact on global liquidity continued to play havoc on equity bourses worldwide. Market participants turned risk-averse and have begun closing positions aggressively. In a major sell-off that swept stock markets across Asia-Pacific on Thursday, the 30-share Sensex of the BSE plunged 642.70 points?or 4.28%?to close at 14,358.21 points, registering its second-sharpest fall ever.
Similarly, the broader S&P CNX Nifty of the NSE registered its second-steepest ever fall of 191.6 points, or 4.38%, to close at 4,178.60 points. Efforts by major central banks, like the US Federal Reserve and the Bank of Japan, to inject fresh liquidity into the system could not restore investors? confidence. As a result, major Asian markets tumbled in the range of 1-7%.
The Nikkei-225 fell 327.12 points, or 1.99%, to close at 16,148.49 points, its lowest closing in CY2007. The Hang Seng lost 703.33 points, or 3.29%, at 20,672.39 points, while the Seoul Composite was down 125.91 points, or 6.93%, at 1,691.98 points. The Jakarta Composite was down 120.45, or 5.94%, at 1,908.64 points. The Taiwan Weighted was down 391.67 points, or 4.56%, to close at 8,201.37 points. The Shanghai Composite lost 104.43 points, or 2.14%, to end at 4,765.45 points.
The Dow Jones Industrial Average lost 167.45 points, or 1.29%, at the close of Wednesday?s trading to fall below the 13,000-level at 12,861.47. The Dow closed below the 13k level for the first time since April 24, 2007. According to provisional figures quoted by agencies, foreign investors pulled out a hefty $1.7 billion from the Taiwanese market in a single trading session on Thursday.
On the other hand, the Indian capital markets regulator said the domestic situation was under control. Speaking to reporters in Hyderabad, Sebi chairman Meleveetil Damodaran said markets were safe and there was no need to be ?unduly worried?. Describing the present volatility in the markets, he said it was due to some foreign investors exiting Indian bourses for reasons of liquidity in their home markets due to subprime lending rates offered to home loans. ?That is a limited nature of a problem and the markets are now in for a natural correction. It is manageable,? Damodaran said.
Market experts feel that the Indian equity market would continue to mirror global sentiments. Sreesankar R, head of research, IL&FS Investmart, said, ?Liquidity reversal globally as a result of the crisis in the US subprime mortgage market will have its impact on the Indian market, too.?