Indian benchmark tanks 11% as central bank holds rates

Bangalore: Indian shares fell 10.96 per cent yesterday, their biggest fall in four-and-a-half years, on disappointment the central bank did not ease policy further and as a global market rout triggered a flight from risky assets.

Reliance Industries, India's most valuable firm, dropped 16.4 per cent to its lowest close since August 2006, and ICICI Bank, which has been overtaken as the most valuable private bank by HDFC Bank, lost 15.2 per cent to its lowest in nearly four years.

"It's a black day. People are confused, scared and worried," said Arun Kejriwal, strategist at research firm KRIS. "They don't want to buy shares even if they are getting it almost free, and they can't exit the market at these levels also."

The main 30-share BSE index dropped 1,070.63 points to 8,701.07, its lowest close since November 23, 2005. It fell as much as 12.3 per cent during trade.

The 10.96 per cent plunge was the index's biggest daily fall since May 17, 2004. All 30 components lost ground, with 20 stocks shedding more than 10 per cent.

The benchmark dropped 12.8 per cent on the week, falling for the fifth consecutive week and taking it losses for the year to 57 per cent, making it one of the worst performing Asian markets.

"It's useless to take about the market's bottom in this kind of a scenario, but it's confirmed that the recovery will be very, very painful and every rise in the short term will be accompanied by excessive selling pressure," Kejriwal said. "The confidence in the market has gone completely."

The 50-share NSE index fell 12.2 per cent to 2,584.00, its lowest close since November 22, 2005.

Global stocks tumbled to a new five-year low, with US stock index futures tumbling sharply in European trade and they had to be frozen at several points in the morning indicating a massive sell-off on Wall Street.

Disappointment

India's central bank, having cut its key lending rate by 100 basis points and slashed banks reserve requirements over the past two weeks, disappointed investors when it did not announce any new measures to shore up markets or the economy at a scheduled policy review.

"The market was also expecting some liquidity measures especially for sectors like real estate that have been hit very badly," said Neeraj Dewan, director at Quantum Securities.

Traders said the slide was unlikely to be halted without foreign buying. Foreign funds have sold a net $12.2 billion of shares in 2008, after buying a record $17.4 billion last year.

Weakened by the foreign selling, the rupee fell past 50 per dollar to a record low yesterday, taking its losses this year to more than 21 per cent.

Top lender State Bank of India fell 12.7 per cent to Rs1,156.35, with it and ICICI both weighed down by concerns about their earnings ahead of their quarterly results on Monday.

SBI is expected to post a 16 per cent profit rise while ICICI's earnings are likely to slip for a second quarter, but investors will be focusing on risks to asset quality.

In the broader market, losers overwhelmed gainers nine to one on volume of 326 million shares.

Dealers said scores of retail investors, who rushed into the stock market last year hoping to join the gold rush after the indices hit a series of record highs, had been hit very badly.

"I had invested about Rs200,000 (Dh15,400, $4,000) in November last year in stocks after I saw some of my colleagues making huge amount of money within a short period of time," said Amit Puri, 35, a technology professional with a private firm in New Delhi.

"Today, the value of my stocks are down by more than half," he said. "I can't even sell those stocks now and get out of the market because at this point in time they are worth a pile of scrap. I will never venture into markets again in my life."