Sensex sheds over 430 pts on global meltdown

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The benchmark Sensex shed over 430 points at close following bearish trend across the globe on credit defaults in the Eurozone countries. The Nifty broke the psychological 4700 mark during the day, but managed to claw back above that level.

European jitters sent the markets into bearish trend. Cost of insuring against losses on sovereign debt rose to a record high on Thursday. According to European Commission forecasts, Portugal's public debt will rise to 91% of GDP by 2011, up from 77%; Greece's debt will increase to 135% of GDP, from 113%, and Spain's will increase to 74% from 54%.

Investors were not pleased with Trichet's comment, Portugal cut down its debt issue. Credit default swaps (CDS) increased sharply. ECB President Trichet said that many members in the Euro Zone will have large, sharply rising fiscal imbalances.

Growing sovereign debt concerns in the euro zone, especially in Greece, Portugal and Spain, have cast a shadow on global markets yet again. Most experts do not see these concerns being restricted to just these three countries. Investors, they feel, have become risk averse and hence fund flows to emerging economies could stop in the near-term.

Greece, Portugal, Spain~Sovereign CDS gain sharply on Thursday. Dariusz Kowalczyk, Chief Investment Strategist at CFC Seymour said, "These countries are not large, at least Greece and Portugal. But Spain is a bigger economy and there are concerns over its debt as well. But the big picture, the problem here is that the growth in 2010 continues to be supported by fiscal stimulus and now it seems that government may be unable to fund this stimulus, these markets became more discriminate regarding debt levels and fiscal position of the public finance sector. That is why Asian markets are falling simply because there is a risk of double dip recession right now in developed economies of the world, if they are unable to continue funding fiscal spending. And since our region is so dependent on exports for its growth, people have to be worried and hence we had sharp sell-off across Asia today."

David Fernandez, Head of Emerging Asia Economic and Sovereign Research, JP Morgan said, "Sovereign risks may not be isolated to just one or two countries."

European markets were trading 1.1-2.3% lower while US index futures were flat because they sold-off quite well yesterday, at the time of closing of Indian equities.

Asian markets witnessed huge selling pressure. Taiwan Weighted slipped 4.3%. Hang Seng, Kospi, Jakarta and Nikkei lost around 3% each. Shanghai was down 1.87% and Straits Times down 2.24%.

Index	Closing Value	Chg (%)
REALTY	3,250.42	-4.36
METAL	15,361.85	-4.26
PSU	9,108.59	-3.52
OIL&GAS	9,578.91	-3.41
SMALLCAP	8,073.92	-3.25
BANKEX	9,217.46	-3.04
MIDCAP	6,347.37	-2.6
IT	4,796.18	-2.48
CAP GOODs	12,796.12	-2.34
TECk	3,045.50	-2.23
POWER	2,944.71	-2.04
AUTO	6,800.53	-2.03
PHARMA	4,734.98	-1.87
FMCG	2,698.72	-1.57

The 30-share BSE Sensex closed at 15,790.93, down 434.02 points or 2.68% and the 50-share NSE Nifty fell 2.61% or 126.70 points, to settle at 4,718.65, after seeing day's low of 4,692.35.

Mehrab Irani of Tata Investment Corporation said, "The 4,575 level is a very important level on the Nifty. If that breaks on a daily closing basis then 4,400 is a minimum level," adding "it can go to 4,000 and worst case to 3,700 also, over the next two-three months."

All the sectoral indices ended in the red; metal, realty, oil & gas and banking were the major leading sectors in today's fall. Respective indices slipped 3-4.4%. However, Tata Power was the only gainer, up 0.8%.

The market breadth was pathetic; about 525 shares advanced while 2410 shares declined on the BSE. Nearly 211 shares remained unchanged. The BSE Midcap Index was down 2.6% and Smallcap down 3.25%. Sugar and fertiliser stocks were the big losers.