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Markets recover somewhat but close in red

10/8/2008 5:26:00 PM

Mumbai, Oct 8 (IANS) After Finance Minister P. Chidambaram and Planning Commission
Deputy Chairman Montek Singh Ahluwalia assured investors of the strength of the Indian
economy, equities markets recovered somewhat but still closed in the red on Wednesday.

After opening weak and going almost through a free fall, the markets recovered
somewhat Wednesday afternoon after Chidambaram told reporters that "there is a
liquidity problem. But, we will address the liquidity issue.”

“The RBI (Reserve Bank of India) governor is already on record. If necessary, he will
take further measures to infuse liquidity," Chidambaram said.

Ahluwalia said: "There is nothing to worry about,” adding “we have to wait and watch if
the US bailout plan succeeds".

Ahluwalia had met Chidambaram earlier Wednesday when the Indian rupee also hit a
six-year low going to more than Rs.48 to a dollar.

The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) closed at
11,328.36, down 366.88 points or 3.14 percent against its previous close at 11,695.24

“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 FIIs), 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.

"FIIs have taken out around $10 billion till date. We expect the total outflow by the end
of this year to be $13.5 billion as there is tremendous redemption pressure," concurred
Amitabh Chakraborty, President-Equities, Religare Securities.
"The FIIs have lost around 48 percent of their capital and 19 percent on the dollar," he
“Together with a major liquidity problem throughout the system there are no buyers even
at the current levels.”

Throughout the morning there was all round selling pressure as nervous investors
grappled with more bad news from European banks and continuous problems in the
global financial system despite the best efforts of central banks across the world, analysts
In the morning session, the Sensex at one point went down by more than 902 points or
7.71 percent to touch 10,782 a level that it had last reached July 31, 2006.
Also, the Sensex went below the 11,000 mark for the first time since Sep, 2006, analysts
The broader-based S&P 50-share CNX Nifty index of the National Stock Exchange
finished at 3513.65, down 92.95 points or 2.58 percent from its previous close at
The BSE midcap index closed at 4,010.48, down 246.68 points or 5.79 percent from its
previous close Tuesday at 4,257.16 points.
The BSE smallcap index closed at 4,699.19, down 277.20 points or 5.57 percent from its
previous close Tuesday at 4,976.39 points.