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Sensex crashes, Rs 3 lakh-crore wiped out

Ends below 23,000-mark, lowest since May 2014.

MUMBAI: The Dalal Street witnessed one of its worst carnages with the Sensex and Nifty ending at their lowest levels since May 2014 amidst a rout in global equities. Investor wealth of Rs 3 lakh crore was wiped off and 500 stocks hit their lowest levels. Mirroring the weakness in global stocks, the Sensex tanked 807.07 points or 3.40 per cent and slipped below its psychological 23,000 level to end the day at 22,951.83. The broader Nifty plunged 239.35 points or 3.32 per cent to end the day at 6,976.35, below the psychologically key level of 7,000 for the first time since Prime Minister Narendra Modi was elected in May 2014.

Meanwhile, in the foreign exchange market, the rupee plummeted 45 paise to end at an over 29 month low of 68.30 per dollar on fresh demand for the US dollar from banks and importers. The global rout was fuelled by US Federal Reserve chairperson Janet Yellen’s testimony to the US Congress stating that she does not expect to reverse the interest rate hike programme started in December 2015 even though the global economic turmoil poses a risk to the US economy.

The global financial markets have remained jittery over the last few months in the wake of a steep fall in the global crude oil prices and growing concerns regarding the health of the global economy forcing investors to turn risk averse and seek the safety of US treasury bonds and gold. Experts said that the fall in commodity prices including oil has raised fears about some of the large European banks that have high loan exposure to the commodity-linked sectors.

Elsewhere in Asia, Japan’s Nikkei 225 sank 2.31 per cent while Hong Kong’s Hang Seng and South Korea’s Kospi Index slumped 3.85 per cent and 2.93 per cent respectively. European shares also traded deep in the red. Britain’s FTSE 100 dropped close to 2 per cent while Germany’s DAX, French stock market index CAC and Spain’s Madrid General Index sank 2.15 per cent, 3.35 per cent and 3.65 per cent respectively. On Friday, markets are expected to open low depending on the fall in the Nasdaq and Dow which opened in the red, said Ambareesh Baliga senior independent analyst. However, he said there will be some bounce back as Thursday’s carnage was absolute capitulation and panic following US Fed chief Yellen’s statement.

“People after all are looking for value and valuations are decent and there should be value buying,” he said. Pain will continue for the next few days and the budget will be the next trigger, he said. “The emerging-market funds, of late, have turned big sellers on the markets. We expect redemption pressure from these funds to continue. Most of these funds are sovereign wealth funds,” said Vijay Singhania, founder and director, Trade Smart Online.

Gold back in fashion, crosses Rs 28,000:

The high bout of volatility and subdued sentiment in the stock markets are expected to turn investors towards gold in the coming days. On Thursday, gold prices staged a smart rebound to surpass the psychologically important Rs 28,000 milestone once again as frantic speculative buying activity swept the bullion hub here in the face of highly bullish overseas trend. The yellow-metal shot-up by a whopping Rs 945 or 3.38 per cent to end at Rs 28,835 per 10 grams — the level not seen since May 20, 2014. In worldwide trade, gold surpassed the significant $1,200 an ounce mark on safe-haven attractiveness and also persistent risk-off sentiment following the overnight dovish monetary policy tightening remarks by US Federal Reserve chair Janet Yellen.

While some of the global gold Exchange Traded Funds (ETFs) have alrea-dy started seeing fresh inflows amidst uncertainty over global economic growth and geopolitical tension in the Middle East, PR Somasundaram, managing director, India, World Gold Council believes that the yellow metal would remain very much in focus going ahead. “All the fundamental factors that influences the prices of gold are remaining strong. The safe haven feature of gold has come back. If weakness in stock market continues for some more time, investors would certainly look towards gold as part of their diversification strategy,” he added.

According to World Gold Council, demand for gold in India has once again proven resilient in the face of a range of challenges, underlining the role of gold as an essential component of household savings. India consumed 848.9 tonnes of gold in 2015, up two per cent from 828.5 tonnes in 2014.

( Source : Deccan Chronicle. )
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