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The stock markets are unlikely to see a reprieve from selling pressure anytime soon, with global cues continuing to paint a picture of gloom.
Besides, the depreciating rupee has added to investor woes.
The falling currency could fan inflation as India imports about 80 per cent of its crude oil requirement. The rupee hit a 28-month low of 49.90 a dollar last week.
Market experts are of the opinion that the central bank should intervene to halt the sharp depreciation of rupee, especially considering its anti-inflation stance.
The political tussle that seems to be going on between two key Ministers — Mr P. Chidambaram and Mr Pranab Mukherjee — in the UPA Government has given bears fresh ammunition to drag the market further.
Intra-day volatility is set to increase as traders rollover their open interest positions in the futures and options segment from September series to October. The September contracts expire on Thursday (September 29).
The last hope of rejuvenation through a US Federal Reserve action turned into despair, with the “Operation Twist” announcement failing to enthuse anyone — economists, politicians and market participants — across the globe.
Goldman Sachs cut growth estimates for the US, Euro region and Japan. Royal Bank of Scotland Group Plc predicted a full-blown recession in Europe. The latest readings, released last week, on the purchasing managers' index of Germany and China were disappointing, raising the spectre and the odds of a global economic relapse.
“India's economic growth process remains critically coupled with the pace of economic activity in the West, especially the US economy. Low growth in the US economy and the resultant rise in risk aversion have historically proved to be detrimental to India's capex cycle. This dynamic is responsible for the historical phenomenon whereby investment demand in India experiences sharp v-shaped dips in years that are characterised by macroeconomic crises,” said Ambit.
Centrum Broking said intensification of worsening global financial conditions, sharp weakening in rupee against the US dollar and GDP growth downgrades can induce further stress to forward multiples. “We believe that the Sensex should trade in the range of 15,500-19,800 with a bias towards the lower end of the range in the next six months. A repeat of the 2008 crisis could potentially take us to as low as 11,200,” it added.
The market last week corrected heavily on expectation that Greece might announce a default.
But the Greek Finance Minister, Mr Evangelos Venizelos, is still confident of the country weathering the storm. He maintained that default is out of the question. “No Greek bond will ever go uncovered. Greece will always cover its obligations.”
But the world continues to see Greece, along with other European countries, as vulnerable.
According to Mr George Soros, investment guru, the current crisis is more serious than the one in 2008, and sovereign debt difficulties in Europe may lead to global fiscal retrenchment as well as to a credit crunch.
“The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally,” the US Treasury Secretary, Mr Tim Geithner, has warned.
“Decisions as to how to conclusively address the region's problems cannot wait until the crisis gets more severe.”
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