The benchmark index fell 480 points to close at 9568, its biggest one-day fall since 7 January 2009, as investors booked profits after the heady gains of last week. The losses in the global markets also weighed down on Sensex.
World stock markets tumbled on Monday, with Hong Kong’s key index sinking nearly 5 percent, as downbeat comments from major US banks and mounting woes at American auto giants undermined recent optimism about economic recovery.
“The markets fell due to short term profit booking. The recent rally was led by banks and metal stocks so they sold off the most today,” said Bharat Sheth, president of institutional sales at Techno Shares and Stock Broking.
Realty, metal and banking stocks were the worst hit in today’s sell-off. The BSE bankex plunged 8.6 per cent and the BSE metal index shed 7.4 per cent. ICICI Bank was the biggest loser in the banking space. The stock plummeted 12.3 per cent to Rs 337. Kotak Mahindra Bank, Yes Bank, PNB and SBI, down over 9 per cent, were the biggest losers in the pack.
Commenting on the banking stocks, Sheth said, “The fundamentals don’t look good. Bond yields are on the rise and the credit growth for banks have also been contracting.”
Metal stocks fell as metal prices declined on the London Metal Exchange. Tata Steel plunged 12.2 per cent while SAIL and Hindalco dropped more than 8.8 per cent each.
The realty index on the BSE also lost 7.2 per cent. HDIL and DLF, down over 9.3 per cent each, were the biggest losers in the space.
Among the Sensex stocks, 28 scrips ended lower while only 2 stocks closed with moderate gains. JP Associates, ICICI Bank and Tata Steel were the biggest losers in the pack, down more than 12.2 per cent each.
In the broader markets, the BSE small cap index fell 1.2 per cent and the BSE mid cap index lost 1.5 per cent.
In the Asian markets, Japan’s Nikkei 225 stock average sank 390.89 points, or 4.5 percent, to 8,236.08, and Hong Kong’s Hang Seng slid 663.17, or 4.7 percent, to 13,456.33. South Korea’s benchmark was down 3.2 per cent.
The retreat followed a sell-off Friday on Wall Street where investors booked profits on the Dow Jones industrial average’s 21 percent gain over 13 trading days.
Data showing a dip in U.S. personal incomes and a slowdown in personal spending were reminders that the world’s largest economy and its banking system remain troubled.
Investors in Asia were also unnerved by reports that the chief executives of JP Morgan Chase & Co. and Bank of America Corp. both said business conditions had got tougher since they reported being profitable for January and February.
“The comments from these two banks show that problems in the U.S. financial sector aren’t over and that’s negative for sentiment,” said Castor Pang, an analyst at Sun Hung Kai Financial in Hong Kong.
“Investors are also cautious before U.S. employment data this week. If the unemployment rate continues to rise that will be a problem for the U.S. and for stock markets in countries like Japan that rely on the U.S. economy,” he said.
As European trading got underway, Germany’s DAX was down 3.7 percent, Britain’s FTSE 100 shed 2.5 percent and France’s CAC 40 lost 3 percent.
U.S. stock futures pointed to more losses Monday on Wall Street. Dow futures fell 187, or 2.4 percent, to 7,575 and S&P 500 futures were off 23, or 2.8 percent, at 793.10.
Adding to the gloom in Asia, data released Monday in Japan showed that industrial production in the world’s second-largest economy fell 9.4 percent in February as the sharp slump in global demand continued to paralyze the nation’s factories.