Sensex plunges over 400 pts as China worries return to haunt

Domestic stocks tumbled sharply in early Thursday trade, marking a return of volatility after a two-session relief rally, as a weak US markets close last night and lacklustre economic data from China and Japan that pulled down their respective markets, also led to sharp pessimism among the local traders. Dragging down the markets in an early broad-market correction, the benchmark Sensex plunged 433 points to touch a low of 25,287.50 as shares in banking, metals, power and auto sectors emerged as the chief laggards. [caption id=“attachment_2426810” align=“alignleft” width=“380”]  Reuters[/caption] At 10.20 am, the BSE S&P Sensex was at 25,349.41, down 370.17 points, or 1.4 percent from the previous close. In the last two sessions, the index gained nearly 850 points on strong global markets-led recovery. The broader 50-stock CNX Nifty was at 7,699.05, down 119.55 points, or 1.5 percent. In view of the steep fall, market breadth displayed a weak trend as 1,305 stocks declined while 296 scrips advanced and 37 were unchanged on the BSE so far. Overnight, key US indices dropped more than 1 percent, while across Asia major Chinese gauges, Hang Seng & Shanghai Composite Index, fell 1-2 percent and Japan’s Nikkei shed 2.6 percent after surging 7.7 percent a day before, its biggest single-day percentage rise since October 2008. Amid lingering worries about sluggish global growth, latest Chinese economic data showed August consumer inflation edging up, but falling producer prices reignited concerns that the world’s second-largest economy deflation is facing greater risk of deflation. Furthermore, Japan’s key gauge of capital spending unexpectedly fell for a second straight month in July, signalling that the economy is struggling to get back on track after contracting in the second quarter, a Reuters report said. However, in view of the struggling global economy, the Reserve Bank of New Zealand resorted to a more proactive step and cut benchmark rate by 25 basis points to 2.75 percent and indicated further rate cut measures if Chinese economy continues its downward trend. Domestic traders hammered commodity-related stocks after the recent run-up, as fresh data pointing towards slowing Chinese economy raised fears of more pain in global commodity prices. Shares of Hindalco plunged 3.8 percent to Rs 75.60, Vedanta lost 3.1 percent to Rs 96.75, Tata Steel dropped 2.5 percent to Rs 233.40 and ONGC fell 2.3 percent to Rs 225.20. Other frontline losers such as SBI, ICICI Bank, Tata Motors, BHEL, HDFC, Reliance Industries, Cipla and Axis Bank were down nearly 2-3 percent.