Global stock markets were hit by a tsunami of selling as investors fled from the equity and commodities markets around the world and sought safe haven in the strong dollar after the US Fed on Wednesday warned of a slowdown in the US economy. The Fed also failed to pump money directly into the limp US economy
but announced it would sell $400 billion of short-term debt and buy long-term debt in what it called “Operation Twist”. Commodities slumped as it was felt if there was no growth in the US and Europe there would be no demand for commodities.
India was one of the worst hit with the rupee slumping to a 25-month low at 49.17 to the dollar and though the RBI intervened twice it could not stop the dollar buying spree by banks. The Sensex plunged to a 26-month low, closing 704 points down at 16,361.15 with investors losing `2.15 lakh crore. The Nifty hit a 25-month low at 4,923.55, down 209.60. Stocks went into freefall led by Relia-nce, which has the heaviest weightage in the Sensex. Reliance fell over six per cent while Bharti, Tata Motors, TCS, L&T and RCom lost between 4.3 per cent and 7.91 per cent.