MUMBAI, 17 August 2007 — Indian share prices plunged 4.28 percent yesterday, the market’s sharpest one-day drop in more than a year as investors reacted to a US credit crunch linked to risky home loans, dealers said.
They said banking, metal and property shares fell on concern that credit costs may also rise in India.
The Mumbai stock exchange 30-share Sensex index fell 642.70 points to 14,358.21, the biggest one-day tumble since May 18, 2006, when the market fell more than 825 points.
“Investor sentiment has been hit. We will have to watch trends in coming days to see how deep this correction could be,” said Naresh Garg, chief investment officer with the Sahara Mutual fund.
“While the financial risks are real, the long-term India story appears intact,” he said.
By yesterday’s close, the Sensex was down 9.5 percent from its record intraday high of 15,868.85 set on July 24.
The partially convertible rupee weakened against the dollar Thursday to 41.09 from 40.69 on Wednesday, its lowest level in nearly two months on worries about capital outflows. The rupee rose against the euro to 55.16 from 55.42.
Overseas funds have sold around $1 billion worth of Indian equities in the past three weeks to take total overseas equity investment down to $9.6 billion this year, from a high of $10.5 billion in July.
Losers led gainers 1,869 to 842 on volume of 52.63 billion rupees ($1.28 billion).
The world’s sixth-largest steel maker Tata Steel saw the biggest fall among index stocks, plunging 66.35 rupees or 10.34 percent to 575.35. India’s largest bank State Bank of India fell 93.3 rupees or 5.78 percent to 1,521.6, while the largest property stock DLF fell 19.2 rupees or 3.19 percent to 584.05.
Dealers said bank, metal and property stocks fell as concern grew about wider financial sector difficulties linked to the US subprime mortgage sector.
The benchmark 30-share Sensex index plunged 653.02 points in early trade to hit 14,347.89, down 4.35 percent from Tuesday’s close of 15,000.91.
“The markets are clearly nervous, tracking the global markets over the past two days. Traders should stay away as there is no clarity on where the correction will end,” said Hiten Mehta, a fund manager with Fortune Financial Services.
“It’s been headless selling. But we expect some support for Indian markets at lower levels,” said a dealer with brokerage Jamnadas Morarjee.
The partially convertible rupee fell against the dollar yesterday to 41.11 from 40.69, its lowest level in nearly two months on worries about capital outflows due to global credit concerns.
Overseas funds have sold almost one billion dollars worth of Indian equities in the past three weeks to take total overseas equity investment to $9.6 billion this year, from a high of $10.5 billion in July, official data showed Wednesday.
Local funds have bought 4.2 billion rupees ($102 million) worth of Indian stocks this month.
India’s stock markets were closed Wednesday to celebrate the 60th anniversary of independence from British rule.
