Sensex falls again

EVEN as central banks continued to unveil rate cuts to boost liquidity into the system, equity investors across Asia and Europe dumped stocks on concerns over corporate earnings. Toyota Motor, the world’s secondlargest automobile firm, warned of the biggest drop in profit in at least 18 years, due to a combination of weak demand and strong yen. Indian equity benchmarks fell 3-4%, but fared better than Asian peers like Hong Kong, Japan, South Korea and Taiwan, which were down 5-7%. Key European markets fell despite rate cuts announced by the Bank of England and the European Central Bank. The Bank of England on Thursday unexpectedly lowered its key rate by 1.5 percentage points to 3%, the lowest rate since 1955. ECB slashed its key rate by 50 basis points to 3.25% — the second cut in less than a month — while rate cuts were announced by the Czech and Swiss central banks too. ECB President Jean-Claude Trichet did not rule out a further reduction in interest rates, saying the global financial crisis could lead to an extended economic slump. The 30-share Sensex ended the day at 9,734.22, down 385.79 points over the previous close. The 50-share Nifty closed at 2892.65, down 92.30 points. Traded turnover was slightly better, compared with the early part of the week. Close to Rs 58,000 crore worth of shares and equity derivatives were traded on both exchanges combined. However, foreign institutional investors continued to press sales. As per provisional data, FIIs net sold Rs 511 crore worth of shares on Thursday. Domestic institutions seem to have resumed their buying activity, mopping up shares worth over Rs 350 crore. “The consensus forward P/E slipped into the single digit territory — a level below, which it has not spent much time ever in the past. Most unbelievably, trailing price-tobook has collapsed to within 10% of the lowest levels seen since at least 1995,” said a strategy note by broking house Credit Suisse. “The market has come to a point where long-term, value investors that are not interested in timing the bottom should begin to invest heavily,” the note added. Metal shares took a pounding, and was the worst-performing sector, with the BSE Metal index shedding over 8%. Realty shares were the best performing sector, with the BSE Realty Index ending around 1% higher than the previous close.