Mumbai: Stock markets turned a sea of red on Thursday, with the BSE Sensex plunging the most in 26 months -- down 704 points to 16,361.15 -- as investors dumped equities globally on US Fed warning on the American economy, triggering fresh fears of worldwide slowdown.

All the 13 sectoral indices closed with sharp losses of up to 6 per cent, while all 30 Sensex-scrips closed in red.

Investors lost over Rs 2 lakh crore in the meltdown.

Besides, fall of the rupee to over 2-year lows against the US dollar -- Rs 49.36 per USD in intra-day trade -- weakest level since July 13, 2009, added to investor worries.

Asian and European markets tumbled, following drubbing of the Wall Street as funds pulled out of risky assets on worries over slowing global economy.

Analysts said the US Federal Reserve disappointed investors with its stimulus plan on Wednesday, while warning of serious downside risks to American growth amid severe euro zone debt crisis.

The US indices, Dow Jones and Nasdaq tanked 2.49 per cent and 2.01 per cent respectively, weighing heavily on other global markets on Thursday.

The Hong Kong's Heng Seng dropped 4.85 per cent, Japan's Nikkei by 2.07 per cent, Indonesia’s index by 8.88 per cent. Markets fell more than 3 per cent in Taiwan, Russia and Poland. The European indices, led by London' FTSE plunged 4.55 per cent, followed by Paris - 4.65 per cent - in early trade.

Stocks Bleed

The 30-share BSE index, Sensex, opened 230 points lower and plunged to 16,361.15, a fall of 704.00 points or 4.13 per cent. It had plunged by 869.65 points or 5.83 per cent on July 6, 2009.
Similarly, the broad-based NSE index Nifty plunged 209.60 points, or 4.08 per cent to close below 5K mark at 4,923.65. Reliance Industries fell 6.16 per cent and Infosys by 3.28 per cent. The two carry over 20 per cent weight on the Sensex. RIL alone contributed over 110 points to the fall.

RIL, ICICI Bank, HDFC, HDFC Bank, Infosys, L&T, TCS, Bharti Airtel, SBI, Tata Motors, M&M, Sterlite and Jindal Steel together contributed over 600 points to the drop.

"The fall in the Indian markets was on account of crash in the global markets. Most of the European markets declined nearly 4 per cent and Asian markets slipped by 2-4 per cent," said Parag Doctor, Associate VP at Motilal Oswal Securities.

Analysts also said that the fall in factory output of the world's second largest economy, China, for three months straight in September, was evidence of spreading slowdown as US Fed's stimulus failed to enthuse investors.

"The Fed’s so called ‘Operation Twist’ did not have any pleasant surprise for the equity investors across the world. In fact, it gave warning signals of significant downside risks to the US economy," said Amit Chheda, Equity Head at Inventure Growth and Securities.

"Nonetheless, worries in Euro zone are larger at the moment. Unless a comprehensive bail-out is not acted upon, we could see high risks to European banks holding euro-assets, which could lead to a domino effect in other continents as well," Chheda added.

Pranab reposes faith in Economy

Meanwhile, Finance Minister Pranab Mukherjee, who is on a visit to the US, expressed confidence that India will be able to achieve 8 per cent growth this year, even as he noted that the global economic environment remains an area of concern.

"We will have 8 per cent growth even this year, though the first quarter growth figure is 7.7 per cent," he told reporters here after meeting leading Indian industrialists at an investment forum. Investors ignored sharp dip in food inflation to 8.84 per cent for week ended September 10, from 9.47 per cent in the earlier week.

Movers and Shakers

Jaiprakash Associates was the top loser from the Sensex pack with a fall of 9.33 per cent, followed by DLF (7.16 pc), Sterlite Ind (6.82 pc), Tata Motors (5.98 pc), Bharti Airtel (5.22 pc), Jindal Steel (4.90 pc), TCS (4.59 pc), Hindalco (4.52 pc), L&T (4.46 pc), HDFC (4.42 pc), HDFC Bank (4.28 pc), ICICI Bank (4.20 pc), NTPC (4.14 pc) and Wipro (4.14 pc). Others closed down between 1 per cent and 4.0 per cent.

Among sectoral indices, BSE-Realty crashed by 5.67 pc, Metal (4.34 pc), Oil&Gas (4.19 pc), Teck (4.10 pc), Bankex (3.98 pc), Auto (3.86 pc), IT (3.86 pc) and Capital Goods (3.83 pc).

The total market breadth at BSE was sharply weak as 2,235 stocks ended with losses, while only 606 finished with gains. The total turnover was relatively up at Rs 2,818.81 crore from Rs 2,536.54 crore on Wednesday.