It was another day of bloodshed for stock markets around the globe, triggered again by weakness in the US.
The trouble started when American Home Mortgage Investment Corp said Tuesday it may have to liquidate assets and that it was unable to borrow on its credit facilities.
At the same time, Bear Stearns said it halted redemption from a third fund as losses in the credit markets have spread beyond securities related to sub-prime mortgages. Recently, two of its hedge funds collapsed.
To make matters worse, Macquarie Bank warned that two of its investment funds could lose up to 25%, or $300 million, of their value as a fallout of the US sub-prime loan crisis hit Australian shores.
This sent smoke signals to investors across the globe to reshuffle money from high risk assets to lesser risk assets.
"The contagion, which started in the US sub-prime mortgage market, is likely to spread to other sectors as well. If the overall investor sentiment turns cautious, emerging markets like India will stand to lose," said Shankar Char, head dealer at Centrum Capital.
Back home, just when one thought the market had recovered from Friday's losses, the bears made a vengeful comeback.
Indices opened sharply lower reversing all gains made the previous day, and the situation only worsened as the day proceeded.
National Stock Exchange's Nifty shed 183 points or 4.04% at 4346. Intra day, the index dipped to a low of 4339.75. The high for the day was 4532.9.
Bombay Stock Exchange's Sensex plummeted 615 points or 3.96% to 14936, making an intra-day low of 14922.17. The high was 15344.02.
Real estate stocks took the biggest hit as the BSE Realty Index plunged 6.64%. The BSE Capital Goods Index lost 4.69% and BSE Metal Index dropped 4.81%.
On the Sensex, ACC slumped 8.87% and was the biggest loser. Reliance Energy (down 7.08%), Hindalco (6.44%), Ranbaxy (5.67%), Reliance Communications (5.05%), Tata Steel (5.04%) and Reliance Industries (4.98%) were the other Sensex losers.
Index and stocks futures on NSE also were beaten down as traders shorted heavily. Discount between Nifty August and spot was 60 points midway in the session, but narrowed to 45 points at close. Open interest rose 19.58% to 4.81 crore.
On Monday, foreign institutional investors were net sellers of equity to the tune of Rs 150 crore or $36.80 million.
While market direction in the near term is anybody's guess, analysts believe India will manage to evade negativity in the long run, given the country's economic growth projections.
"We could see a 10% correction in the market over the next 2 months," said Char.
The trouble started when American Home Mortgage Investment Corp said Tuesday it may have to liquidate assets and that it was unable to borrow on its credit facilities.
At the same time, Bear Stearns said it halted redemption from a third fund as losses in the credit markets have spread beyond securities related to sub-prime mortgages. Recently, two of its hedge funds collapsed.
To make matters worse, Macquarie Bank warned that two of its investment funds could lose up to 25%, or $300 million, of their value as a fallout of the US sub-prime loan crisis hit Australian shores.
This sent smoke signals to investors across the globe to reshuffle money from high risk assets to lesser risk assets.
"The contagion, which started in the US sub-prime mortgage market, is likely to spread to other sectors as well. If the overall investor sentiment turns cautious, emerging markets like India will stand to lose," said Shankar Char, head dealer at Centrum Capital.
Back home, just when one thought the market had recovered from Friday's losses, the bears made a vengeful comeback.
Indices opened sharply lower reversing all gains made the previous day, and the situation only worsened as the day proceeded.
National Stock Exchange's Nifty shed 183 points or 4.04% at 4346. Intra day, the index dipped to a low of 4339.75. The high for the day was 4532.9.
Bombay Stock Exchange's Sensex plummeted 615 points or 3.96% to 14936, making an intra-day low of 14922.17. The high was 15344.02.
Real estate stocks took the biggest hit as the BSE Realty Index plunged 6.64%. The BSE Capital Goods Index lost 4.69% and BSE Metal Index dropped 4.81%.
On the Sensex, ACC slumped 8.87% and was the biggest loser. Reliance Energy (down 7.08%), Hindalco (6.44%), Ranbaxy (5.67%), Reliance Communications (5.05%), Tata Steel (5.04%) and Reliance Industries (4.98%) were the other Sensex losers.
Index and stocks futures on NSE also were beaten down as traders shorted heavily. Discount between Nifty August and spot was 60 points midway in the session, but narrowed to 45 points at close. Open interest rose 19.58% to 4.81 crore.
On Monday, foreign institutional investors were net sellers of equity to the tune of Rs 150 crore or $36.80 million.
While market direction in the near term is anybody's guess, analysts believe India will manage to evade negativity in the long run, given the country's economic growth projections.
"We could see a 10% correction in the market over the next 2 months," said Char.
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