Yet another selloff in global markets spooked Indian markets on Wednesday with the benchmark Sensex plunging by 453 points. The fall across the globe was triggered by concerns over the US economy, especially the deepening mortgage lending crisis and falling retail sales.The Sensex closed 3.4 per cent lower at 12,529.62, its biggest fall since March 5, 2007 when the Sensex had lost 471 points due to weakness across the Asian markets. The S&P CNX Nifty lost 129.45 points (3.4 per cent) to settle at 3,641.10. All the sectoral indices ended in the red. The biggest loser in percentage terms was the banking sector index which plunged by 270.40 points (4.1 per cent). The IT Index plunged 3.97 per cent and the Capital Goods Index lost 3.3 per cent.Said R Venkataraman, executive director, India Infoline Ltd, “High liquidity in the markets had propelled the Sensex to an all time high of 14,700. The budget was a non-event but global factors like the Yen carry trade, sub-prime mortgage bust and the tightening of interest rates have led to market instability and liquidity pressures with people selling further into rallies. Although the short-term trend is extremely volatile, the long-term outlook remains intact and healthy.” The slide was triggered by a drop in US stocks overnight amid worries about problems facing US subprime lenders, which provide mortgages to people with poor credit. The Dow fell 242.66, or 1.97 per cent, to 12, 075.96, its second-biggest point drop in nearly four years. That sparked concerns among investors in Japan over the outlook for the US economy, Japan’s biggest export market.The benchmark Nikkei 225 index fell 501.95 points, or 2.92 per cent, to finish at 16,676.89 points on the Tokyo Stock Exchange. Key benchmark indices in Hong Kong, China, South Korea, Singapore and Taiwan were down between 1.4 - 3 per cent.The Japanese currency yen also extended the biggest gain in two weeks, raising fears over further unwinding of stocks and bonds by investors. If the yen gains further, investors who have taken yen loans will sell stocks and pay back the loans.Domestic bourses had showed some sign of a tentative recovery from a steep fall in late February and early March. From 12,415.04 on March 5, 2007, the Sensex had risen 634.31 points (5.1 per cent) to 13,049.35 by March 8, 2007. It had seen a bout of volatility over the next three days, moving between 12,885 and 12,983. A sharp fall of nearly 9 per cent in Chinese stocks on February 27, 2007 had left global bourses badly shaken that time. The sharp fall had driven some investors to cut carry trades, where they borrow cheaply in Japan and invest in countries with higher yields. The Sensex is off 14.4 per cent from its all-time closing high of 14,652.09 of February 8, 2007. It has declined 9.1 per cent in calendar 2007 so far.
