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Global selloff in the making? Thursday Closing Report

The Indian market has been down for nine days in a row for the first time since 2001. Commodities are falling sharply and all European markets are down. Is this a turning point?

The Sensex fell 259 points to close at 18,211, while the Nifty fell 77 points to close at 5,460. It was the 9th consecutive day of decline. Since 1990, the market has been in the negative for nine consecutive days on five occasions (excluding the current fall). Of these five occasions, it has turned positive on the 10th trading day in four instances. Interestingly, a continuous stretch of decline over nine days has not happened since September 2001. We expect the market to bounce back-possibly to 5,700.

At the same time, all commodities are falling sharply. After a big decline yesterday, copper, lead, nickel, oil, aluminium, gold and silver are all down between 5%-2% at the time of writing.

The commodities pack has been in a slow motion wreck since February this year. Copper is down 14%, zinc 18%, nickel 16%, lead 22% and cotton 27%. Over the last few days silver has crashed by 20% after a parabolic rally over the last six months. The Indian market has fallen by 8% over the last few weeks and stock prices are likely to fall further. Possibly, a global decline in all asset classes is in the offing over the next few months.

The Sensex opened the day at 18,485, in the positive, and remained there till the noon session. But the Nifty opened negative at 5,532. During the morning session itself, the indices hit an intra-day high of 18,569 and 5,560, after which the move on the bourses was range-bound. Weaker-than-expected earnings from Bharti Airtel also put pressure on the market in morning trade.

But an expression of caution with regard to economic growth this year, by chief economic advisor Kaushik Basu led to a sharp selloff, pushing the benchmarks further southwards in the post-noon session. In the last one hour, the indices hit 18,161 and 5,444, which are new intra-day lows in the recent falling trend and the lowest in the last 28 days. As we said earlier, the support for the Nifty lies at 5,300. The advance-decline ratio on the National Stock Exchange was 423:1273.

Among the broader indices, the BSE Mid-cap index declined 0.95% and the BSE Small-cap index slipped 1.23%.

With the exception of the BSE Consumer Durables index (up 0.22%) and BSE Oil & Gas (up 0.01%), all other sectoral gauges ended lower. The losers were led by BSE Realty (down 2.89%), BSE Power (down 2.40%), BSE Fast Moving Consumer Goods (down 1.82%), BSE Healthcare (down 1.68%) and BSE Bankex (down 1.66%).

The top losers on the Sensex today were Reliance Communications (down 5.52%), Tata Power (down 5.21%), Reliance Infrastructure (down 4.23%), Sterlite Industries (down 3.27%) and Bharti Airtel (down 3.25%). Hero Honda (up 6.11%), Reliance Industries (up 0.26%) and Maruti Suzuki (up 0.06%) were the gainers on the index.

Meanwhile, it was also announced today that food inflation fell to 8.53% for the week ended 23rd April from 8.76% in the previous week, on the back of a fall in prices of pulses, reversing the upward trend seen in the previous fortnight.

The latest numbers are likely to come as a relief for the government and the Reserve Bank of India (RBI), even as the central bank's rate tightening announced on Tuesday was almost totally focused on fighting price rise.

Bourses in Asia settled mostly in the red on lower commodity prices and nervousness ahead of an announcement on interest rates from the European Central Bank later today. Negative earnings reports across the region also weighed on investor sentiments.

The Hang Seng declined 0.24%, the KLSE Composite fell by 0.47% and the Straits Times was down by 0.91%. On the other hand, the Shanghai Composite gained 0.26%, the Jakarta Composite added 0.04% and the Taiwan Weighted surged 0.80%. Markets in South Korea and Japan were closed on account of a local holiday.

Back home, foreign outflows were offset by purchases by domestic investors on Wednesday. Foreign institutional investors were net sellers of stocks worth Rs992.14 crore, whereas domestic institutional investors were net buyers of shares worth Rs914.10 crore.

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