Tuesday, the Indian market is likely to open flat following higher US index futures and some intra-day recovery in the other Asian markets this morning. While renewed concerns about the health of US banks/insurers and the world economy may weigh on investor sentiment, stock-specific buying and support from domestic financial institutions may help cut losses.
On a net basis, foreign funds sold shares worth Rs.580 crore on Monday, while domestic financial institutions, which include insurance companies and mutual funds, bought shares worth Rs.334 crore, according to provisional data on the National Stock Exchange.
Currently, markets across the Asia-Pacific region are trading lower after recouping some of their early losses. China's Shanghai Composite index is down 1.26%, Hong Kong's Hang Seng index is declining 2.10% and Japan's Nikkei 225 index is moving down 2.54%.
Stocks on Wall Street showed a steep decline over the course of the trading day on Monday, extending their recent downward move. The major averages all moved sharply lower, with the Dow falling below the 7,000 level for the first time since 1997. The Nasdaq Composite index fell 3.99%, the Dow Jones Industrial Average tumbled 4.24% and the S&P 500 index slumped 4.66%.
The weakness in the markets came amid continued concerns about the outlook for the financial industry after American International Group (AIG) reported a record quarterly loss and received additional government assistance. Separately, HSBC Holding (HBC) released full-year results that fell substantially year-over-year, adding to the fear in the financial sector. The company also said it would be cutting 6,100 jobs to cut costs.
The price of crude oil dropped nearly 10% in New York trading on Monday and settled at $40.15 a barrel, as economic worries battered financial markets and a deteriorating global economic environment threatened to cut further into fuel consumption, outweighing the bullish impact of OPEC's strong compliance with supply curbs.
After declining to an all time low of Rs.52 during the day, the rupee settled at Rs.51.90/92 against the dollar on Monday amid renewed concerns of capital outflows and weak trade data and due to a lack of aggressive intervention from the RBI.
On Monday, the Indian market fell sharply, in line with the weakness in the other global markets. A slide in India's exports for the fourth month in January and a fall in the value of the rupee to a record low also compounded investor woes, as it is feared that it will lead to more capital outflows. Stocks across the sectors ended mostly in negative territory. Banking, metal, oil/gas, capital goods and power stocks bore the brunt of the selling. The BSE Sensex closed at 8,607, down 285 points or 3.20% over the previous close and the S&P CNX Nifty closed at 2,675, down 89 points or 3.22%.
