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After mayhem, Indian equities recover on global interventions

Mumbai, Oct 8 (IANS) A key Indian stock market index crashed by over 950 points
Wednesday, but staged an impressive recovery following regulatory interventions across
the globe to cushion the financial crisis that has gripped international financial markets.

A meeting of Union cabinet, presided over by Prime Minister Manmohan Singh, also
discussed the turmoil in the Indian capital markets and the impact of the global financial
crisis on the Indian economy, following which it was decided to set up an expert
committee to suggest possible action.

At one point during trading, the bellwether 30-share sensitive index - of the Bombay
stock exchange was down a whopping 954.48 points, but recovered as key Indian policy
makers sought to talk the markets up and authorities in the US and Britain acted with
some policy measures including a bailout package and rate cuts.

At the day's bottom at 10,740.76 points, the bellwether index was at its lowest level since
Aug 1, 2006, even as the Indian rupee also came under the grip of the global financial
storm, falling to a six-year low above Rs.48 to a dollar.

Semblance finally returned and lifted the markets after the British government announced
a 50 billion pound bailout package for the banking sector. This was followed soon by a
50-basis-point rate cut by the US Federal Reserve.

The Sensex, the oft-quoted index to highlight the movement of Indian bourses, finally
ended at 11,328.36, against the day's low of 10,740.76 points, but with a loss of 366.88
points or 3.14 percent over the previous close.

Apart from the fears of the adverse impact of the global financial turmoil on the Indian
stock markets, another major concern that led to the crash Wednesday was the net
outflow of investment from foreign funds in recent weeks.

Foreign institutional investors have taken out around $10 billion so far in the current
year. We expect the total outflow by the end of this year will be $13.5 billion, said
Amitabh Chakraborty, president of Religare Securities.

The foreign funds have lost around 48 percent of their capital and 19 percent on the
dollar, he said. There is tremendous redemption pressure.

There was tremendous nervousness in the market because despite the hard work being
done by central banks across the world the crisis is refusing to go away and more and
more European banks are getting into trouble, said Jagannadham Thunuguntla, head of
the capital markets arm of India's fourth largest share brokerage firm, the Delhi-based
SMC Group.

Foreign institutional investors, especially hedge funds and private equity funds are selling
indiscriminately and at any price as they have now come under tremendous redemption
pressure, Thunuguntla told IANS.

Together with a major liquidity problem throughout the system there are no buyers even
at the current levels, he added.

Wednesday saw only six out of 30 scrips in the basket of shares of the Sensex managing
to end on a positive note, led mainly by pharmaceuticals major Ranbaxy that got a
reprieve from the US Food and Drugs Administration on some key drugs.

Tata Motors, Mahindra & Mahindra, Maruti Suzuki, DLF and Reliance Communications
also bucked the trend, registering gains of between 9.08-0.15 percent.

Jaiprakash Associates led the losers, with its scrip down 9.91 percent, followed by Wipro
-, Sterlite -, ICICI Bank - and State Bank of India -.

The recovery was also staged after key Indian policymakers, including Finance Minister
P. Chidambaram and Commerce Minister Kamal Nath, said all was well with the
economy but for some liquidity issues.

'Indians should feel confident about the fact that India is a growing economy,' the finance
minister told reporters in New Delhi. 'If need be, we will take further measures to infuse
liquidity in the market.

The finance minister's comments came even as Planning Commission Deputy Chairman
Montek Singh Ahluwalia maintained that the current turmoil in the Indian stock markets
was part of the global crisis.

'There is nothing to worry about, he said, while unveiling a new Internet site of the plan
panel. We have to wait and watch if the US bailout plan succeeds,' Ahluwalia, who met
Chidambaram earlier in the day, added.

Sensex Snapshots:

Wednesday Open: 11,316.24

Wednesday Close: 11,328.36

Wednesday High: 11,405.73

Wednesday Low: 10,740.76

Previous Close: 11,695.24

Change in points: -366.88

Change in percentage: -3.14

52 week fall in percentage: -35.23

Change of small-cap -: -5.57

Change in mid-cap -: -5.79

Top gainer: Ranbaxy

Top loser: Jaiprakash

In Britain, meanwhile, the government announced a major rescue package for leading
banks of 50 billion pounds - to stabilize the banking system.

Chancellor of the Exchequer Alistair Darling, detailing the plan in a written statement to
the London Stock Exchange, said the package was aimed at placing the banking industry
on a long term 'sound footing.'

In similar fire-fighting action, the US Federal Reserve cut its interest rate by 50 basis
points, even as central banks in Canada, Switzerland, Sweden and Australia, as also the
European Central Bank, initiated similar actions.

In the morning, the Indian markets largely followed the trends around the globe where
key indices in Australia, Japan, Hong Kong and South Korea registered sharp losses
while the authorities in Indonesia ordered closure of trading after the market index
breached the circuit breaker by falling more than 10 percent.

One of the key reasons for the fall was the news suggesting a much larger and wider
impact of the current global financial turmoil than feared earlier where the Iceland
government was forced to borrow a paltry $5.6 billion to tide over its finances and also
nationalised the country's second largest bank.

The inter-bank money market in the US and Europe also came to virtual standstill
following complete lack of confidence among banks, analysts said, hoping that some bail
out packages that are in the offing will be able to cushion the liquidity crisis in the
ensuing days.