Record high crude prices that breached the $140-a-barrel mark and are now threatening to climb higher at an unabated pace sent shivers down the spine of equity market participants across the globe on Friday. Asia?s two most fast developing economies, which were once the toast of global markets, took the biggest beating. The Indian and Chinese markets were the biggest losers in the region with Shanghai Composite shedding the highest, 5.29%, and India?s 30-share Sensex ending 4.30% lower.
Comment by the Organisation of Petroleum Exporting Countries (Opec) president on Thursday that crude prices could rise to $170 a barrel in the next few months took the markets across the globe by surprise. Markets fell, reflecting the overnight fall in the US markets, with the Dow Jones Industrial Average (DJIA) falling by 358.41 points or 3.03% to close at 11,453.42 points, its lowest level since September 2006.
The rising inflation rate also played its due role in worsening the situation in India. The ever-looming inflation, measured by the wholesale price index (WPI), surged to a fresh high of 11.42% for the week ended June 14 as against 11.05% a week earlier.
The bellwether Sensex of the Bombay Stock Exchange (BSE) took a knock of 619.60 points or 4.30% breaking the psychological level of 14k to finally settle down at 13,802.22 points while the broader S&P CNX Nifty on the first day of July derivatives contract plunged by 179.2 points or 4.15% to close at 4,136.65 points.
Close on its heels, China?s Shanghai Composite was the worst hit amongst the Asian market plunging by 153.42 points or 5.29% to end at 2,748.43 points while the Hong Kong?s Hang Seng showed some resilience posting a loss of 413.32 points or 1.84% to close at 22,042.35 points. Japan?s broader Nikkei fell by around 2% or 277 points to finally settle at 13,544 points for the day.
Commenting on this slide, Motilal Oswal, Chairman, Motilal Oswal Securities Ltd said, ?In 2005, when the oil prices surged from $40 to $100 a barrel, our markets grew by leaps and bound but now when the crude prices are surging it is playing with the sentiments of the investors. Basically, they are doing away with the excesses of the markets that we witnessed in the last few years.?
The closing level of the Sensex and the Nifty on Friday has once again brought the market closer to the level of the first day closing of calendar 2007.
The Sensex is just 1.01% away and the Nifty is 3.22% away from the first closing session of 2007.
?The inflationary pressure have been absorbed by the markets and the current data was well within expectation but the rising crude prices coupled with foreign out flows is really a matter of concern for the Indian markets? said a head of Research of reputed broking firm.