Steepest weekly decline since May 2006.

Spooked by falling global markets and higher-than-estimated inflation figures, Indian markets on Friday plunged to their steepest weekly decline since May 2006, shaving off Rs 2,08,361 crore in market capitalisation.

The outlook for next week also looks bleak with stocks in Europe (which opens in the latter half of trading hours on the Indian markets) and US stock futures falling on concern that credit-market losses will deepen for financial companies and an employment report may show that the US has slipped closer to recession.

With the dollar falling to its weakest in three years against the Japanese yen, foreign funds, which have used the cheap Japanese currency to buy stocks in emerging markets like India, are under pressure, said dealers.

The Bombay Stock Exchange's (BSE's) 30-share Sensex fell 566.56 points, or 3.42 per cent, to close at 15,975.52 points, its lowest level since September 18, 2007. The 50-share Nifty index of the National Stock Exchange closed for the week at 4,771.6 points, lower 149.8 points, or 3.04 per cent.

Real estate, power and bank stocks were the worst hit in Friday's mayhem.

With Friday's fall, the Sensex has lost 4,897.81 points or 23 per cent from its peak on January 8 of 20,873. This week alone has seen the index falling by 1,603.2 points, or 9 per cent.

This is the biggest weekly loss since May 15 to 19, 2006, when the Sensex lost 10.96 per cent (1,346.50 points). This is also the biggest post-budget weekly fall for the benchmarks.

Foreign institutional investors (FIIs) continued to be net sellers throughout the week. In March so far, they have net-sold equities up to Rs 35,000 crore. Domestic institutional investors bought Rs 20,000-odd crore this month, but could not counter FII selling pressure.

Market breadth remained extremely weak with only 295 stocks advancing against 2,384 stocks declining.

160 stocks hit the lower circuit in Friday's trading session with only six stocks in the upper circuit, reflecting the absence of buyers in the market.

Small- and mid-cap stocks suffered the most. This week, the small-cap index has fallen 8.5 per cent or 818.34 points and the mid-cap index shed 566.21 points or 7.37 per cent.

The Hang Seng (down 841.4 points or 3.6 per cent), Nikkei 225 (down 432.62 points or 3.27 per cent) and Taiwan Weighted (down 127.26 points or 1.47 per cent) were deep in the red.

Key American indices, the Dow Jones Industrial Average (down 214.6 points or 1.75 per cent) and S&P 500 index (down 29.36 points or 2.2 per cent) had a dismal trading session on Thursday after news that Thornburg Mortgage Inc, a mortgage lender, was in default after failing to meet creditor demands for more upfront cash.

"The market is reacting to any bad news on the global front. Purely on the basis of fundamentals, Indian markets are in a buying zone. A lot of large caps are now moving towards value. Markets have factored in a slowdown in corporate earnings and hence that is not likely to affect the market sentiment in a significant way," said Amar Ambani, Vice President (Research), India Infoline.

Via Business Standard