Mumbai: It was an ugly scene on Dalal Street on Friday, with indices falling like nine pins. However, first blood was drawn by the US markets where all three major averages tumbled into deep shades of red as investors were rattled by an intensifying global economic slowdown and fear of its monthly unemployment report.
The Dow and the S&P tumbled more than 4 per cent on Thursday, while the Nasdaq lost 5 per cent on fear that the United States is staring at another recession and that Europe's sovereign debt crisis is swallowing two of its largest economies - Spain and Italy.
US analysts predicted further losses even though stocks have fallen on nine of the last 10 days. Two-year US Treasury yields fell to a record low as investors sought safety in short-term government bonds.
The expectations are not very high from the US payroll data, said Arjuna Mahendran of HSBC Private. "A possible downward revision of the US GDP has worried the street," he said.
Credit Suisse slashed its 2011 year-end target for the S&P 500 index to 1,350 from 1,450, after it reduced its earnings expectations in the US and Euro-area citing weaker macro-economic outlook.
Mark Matthews of Julius Baer feels the next few days will be critical for global markets. The US markets plunged sharply, with the Dow going down more than 500 points in its worst one-day drop since December 2008. "There could be further global correction due to sentiment damage," he said.
Back home too there was no place to hide. But the carnage was contained to an extent towards the ends of the trade. The 30-share BSE Sensex, which shed more than 700 points at one point of time, recovered to close at 17,306, down 387 points. The NSE Nifty managed to stay afloat at 5200 to close 120 points down at 5,211.25.
However, Amit Dalal of Tata Investment Corporation feels Indian economy is likely to benefit from the global turmoil. "All the factors, which fundamentally would affect our earnings, are smoothening down with this particular crisis overseas, except of course, we see a recession worldwide that leads to lower exports," he felt.
Likewise, Nirmal Jain of IIFL said cooling down of crude prices will be positive news for the market. "Whenever the dust settles, we will see some good institutional money coming back to the market," he said.
According to Dharmesh Mehta of Enam Securities, the sell-off is more technical rather than fundamental. "We are seeing reduction in exposure to emerging markets including India," he said.
Meanwhile, market regulator SEBI said it was closely watching the situation which it attributed to global developments and assured the system was well-regulated. "We are closely watching the situation and our belief is that everything is perfect and right in markets," Chairman UK Sinha said.
In mid-day trading, India's volatility index surged to 30 per cent.
Explaining the F&O activity, Siddharth Bhamre of Angel Broking said, "We are witnessing unwinding in 5400-5300 Put options and 5200 Call option is quite active, which clearly suggests that participants are exiting this level too."
The plunge is a good opportunity to start picking up stocks , believes Nilesh Shah of Axis Bank. "In the near-term, there will be uncertainty, but this is the right time to accumulate stocks on selective basis," he said.
However, he added, the uncertainty will last for a while.
We remain by and large investment with very little cash in our portfolios, informs Manish Sonthalia of Motilal Oswal AMC. "I think barring today — where nothing is justifiable — things are turning for India with commodity prices coming down, that is bound to have a positive impact on inflation," he said.
Experts believe the tone is likely to remain negative in the short-term, but add, this will bode well for our market in the long run.
Markets will remain volatile, said CNBC-TV18's Udayan Mukherjee. "I guess, on Monday, it would be 100 points more up or down for the Nifty depending on what the global market does," he said.
The easy response is to go and surrender and sell everything, said Sushil Kedia, President of ATMA. "Markets never allow you to make money easily. In that sense, a 300 point rebound back to about 5450 — you cannot rule that out — but whether it's worth playing is something is a domain of very short-term traders," he said.
For people who are investors and medium-term traders, he said, they will have to give this upcoming rally a pass. "This is not a place to go out and short aggressively," he said adding, "there is one more final leg of a fall that can go down to 4700."
Meanwhile, Bhamre expects to see 5150-5200 in August series, but adds, it would be too fast and too soon. "We would advise against taking long positions here," he said.
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