Investors were spooked on Friday by slowing domestic industrial production and global weaknesses, after Ireland teetered on the brink with its debt costs mounting. Sentiments were dampened further by fears that China would increase interest rates to further cool inflation, sparking a rally in the dollar.
The 30-share Sensex of the Bombay Stock Exchange (BSE) fell 2.10 per cent, or 432 points, to close at 20,156. The broader S&P CNX Nifty of the National Stock Exchange was down 1.98 per cent, or 122 points, at 6,071. Both indices have shed over 4 per cent
from their all-time closing highs since the Diwali Mahurat trading session on November 5.
According to provisional data, foreign institutional investors sold stocks worth Rs 782 crore in the cash segment on Friday. Domestic institutions were net buyers of Rs 245 crore. Over 72 per cent or 2,263 stocks declined against 24.16 per cent, or 753 stocks, that advanced.
Market experts believe there wonât be any major crash from these levels.
"Fridayâs fall was a knee-jerk reaction to rumours of a default by Ireland and anticipation of a Chinese interest rate hike. However, markets may remain range-bound, as investors will wait to gauge the effect of QE-2 for the next two to three months," said a top fund manager at Mumbai-based broker and investment bank Ambit Capital.
"If the US economy still remains weak, a major correction would then take place. Meanwhile, large global funds witnessed inflows," he added.
"The rising dollar index, weakness in global equity markets and media reports stating the Dubai Group will miss an interest payment on a $330-million loan also acted as a dampener for traders," said Amar Ambani, head of Research at IIFL.
Financial services firm Dubai Group has missed two payments on separate loans in recent weeks, including one arranged by Citibank, in the latest sign the emirateâs debt troubles are far from over.
Shares of real estate company DLF fell the most. It was down 5.46 per cent at Rs 327.5. Auto company Mahindra & Mahindra was down 4.75 per cent at Rs 774. Hindalco Industries, the largest aluminium producer, slid 4.72 per cent at Rs 223 as metal prices slumped on China speculation. State Bank of India fell 4.55 per cent at Rs 3,030. Tata Steel was down 3.96 per cent at Rs 606.
The BSE Realty Index was down 4.76 per cent. BSE Consumer Durables slid 3.53 per cent and BSE Metal fell 3.31 per cent. BSE Mid-cap was down 2.32 per cent.
The Shanghai Composite was the top loser in Asia, down 5.16 per cent. Key benchmark indices in Seoul, Hong Kong, Jakarta, Tokyo, Singapore and Taiwan fell between 0.08 and 2.1 per cent. In the US, the Dow traded 0.72 per cent lower in early trades on Friday. In Europe, key benchmarks in Paris, Frankfurt and London were down between 0.61 per cent and 1.78 per cent at the time of going to press.