Stock markets crash; oversold or bears on prowl

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By S Jha

New Delhi, October 3: Indian equity markets again crashed, giving up all the gains of Friday on Monday, with financial market meltdown fear amid Credit Suisse and Deutsche Bank stress weighing high on the investors.

After seven days of uninterrupted downturn, the Indian equity markets had posted healthy gains on Friday, but the bears were ferociously back in action on Monday, as even the government decision to scale down windfall taxes on exports of oil and gas failed to calm down the bourses.

Sensex sunk by over 638 points, with Nifty also sinking by 207 points. The Bank Nifty was punished the most on Monday, as it lost 602 points, with heavyweights such as ICICI bank and HDFC Bank bleeding.

The global financial markets are fearing a re-run of Lehman Brothers moment. The global investment bank had sunk in 2008, triggering a global meltdown in the equity market.

The Adani Group of Companies melted amid the speculations about the stress in Credit Suisse and Deutsche Bank, since the conglomerate is stated to have exposure to one of them at the Hong Kong Branch.

The Pharma sector, which the chartists claim to have broken out from long consolidation ducked the bearish trends in the markets, as Cipla, Dr Dredy, Sun Pharma, Aurobindo Pharma and others rallied. But even them gave up much of the gains as heavy selling hit the market in the last hour of trading.

Incidentally, the foreign institutional investors were the net buyers in the Monday session with a net purchase of Rs 591 crores. But the domestic institutional investors were the net sellers having sold Rs 423 crores of net equities.

The treasury yields and the equity markets function opposite to each other. The treasury yields which had jumped to four per cent in the US cooled down on Monday, triggering a rally on the Down Jones and Nasdaq, with both the indexes rallying by over two per cent in the early hours of the trade on Monday, with traders there hoping that the October series wouldn’t be as nasty as September when the bourses shed over 10 per cent.