The ghost of 2008 seems to have returned to haunt Indian investors with the stock market showing no signs of bouncing back.

With adverse signals coming from within the country (high interest rates and slow down in economic activity) and the global markets (Europe and US debt crisis), the BSE Sensex fell 2 per cent to 16,141.67. Intra-day, it dipped below the 16K mark, but bounced back at close, mainly on account of short covering.

Foreign institutional investors have pulled out Rs 8,956.5 crore so far in August, according to BSE data. The domestic institutions' buying of Rs 6,719 crore in August failed to arrest the market slide. Today, FIIs were net sellers for about Rs 900 crore.

The market is falling due to the continuous selling by FIIs on fears of slower growth, Mr Lalit Thakkar of Angel Broking said. The magnitude of the bear hug could be gauged from advance/decline ratio. As many as 2,083 stocks closed in the red on the BSE on Friday against 773 stocks that finished higher. For the fourth consecutive day, over 1,000 stocks closed in the red on the BSE.

Except BSE-Realty, all the other 12 sectoral indices, including BSE Capital Goods, BSE Power and BSE Oil & Gas, ended in the red.

The BSE Sensex, BSE Mid-cap and the BSE-500 indices have fallen about 13 per cent in the last one month while the BSE Small-cap has slumped 17 per cent.

With the markets falling for the fourth straight week, the question doing the rounds in market is: ‘Has the market entered a bear phase?'. Investors ask these questions when euphoria or pessimism sets in, say marketmen.

“At 6,300 (Nifty) every one was talking about 7,000 levels and right now at 4,800 every one talks about 4,000. There is no element of surprise as at the end of every peak and bottom we see such mindset of market players,” said Mr Hitesh Sheth, Vice-President of Prabhudas Lilladher.

“India's growth had remained relatively strong until the quarter ending March 2011 – but clear signs of slowdown have emerged over the last 3-4 months. We believe that a combination of factors — including persistently high inflation, higher cost of capital, cut in fiscal spending to GDP, weak global capital markets environment and slow pace of investment — will cause a further slowdown in growth,” said Morgan Stanley in a recent research report.

On Friday, information technology counters were the worst performers. With Morgan Stanley and Goldman Sachs having lowered the global growth forecast, particularly for the developed countries, IT stocks bore the sell-off brunt. The BSE IT Index plummeted 4.41 per cent. Infosys crashed to a 22-month low.

In today's fall, Tata Motors lost the most valuable traded counter to Mahindra and Mahindra. Tata Motors now commands market-cap of Rs 38,402 crore against M&M's Rs 44,151 crore. M&M closed 0.29 per cent higher even as Tata Motors slumped 5.28 per cent.

“It was a pathetic situation for day traders; whatever stop-loss they put it got triggered,” said a trader working in a Chennai-based broking firm

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