Indian stocks plummet on global financial turmoil

Indian stocks plunged Monday amid anxiety about the global financial system on news of Lehman Brothers' bankruptcy and the takeover of Merrill Lynch.

The benchmark Sensex index closed down 469 points, or 3.35 percent, at 13,531 after sinking more than 5 percent earlier.

Worries about the forced restructuring of the world's largest insurance company, American International Group Inc., also weighed on investors.

Concerns about Merrill and Lehman unwinding their Indian equity positions and forfeiting service contracts with Indian companies fueled Monday's broad sell-off, as did fears that dwindling international financing would hurt Indian companies seeking to expand, analysts said.

Gul Tekchandani, an independent investment analyst in Mumbai, said the fall today in the market of over 700 points is because of what's happening in the world not in India."

Anticipation that international funding for Indian companies seeking to expand will not materialize _ which would trim domestic corporate growth and squeeze price-earnings ratios going forward _ fueled the broad-based sell-off, he said.

Teckchandani said a string of lethal bomb blasts across India's capital New Delhi Saturday evening weighed less on investor sentiment. "Bomb blasts we take in stride. These things are commonplace, unfortunately," Teckchandani said. "The bombs are Lehman and AIG."

Kaylan Bose, spokesman for the Bombay Stock Exchange, said Monday the exchange had not received any specific threats. Security, he said, "is already on high alert."

Dipen Shah, Vice President of Private Client Group Research at Mumbai's Kotak Securities Ltd. said the market's top concern today was liquidity.

Fears that Merrill and Lehman would unwind their contracts with Indian service companies also weighed on the nation's outsourcing IT sector, which depends on the U.S. for about half its revenue, he said.

Concerns that other global financial players might fumble as the credit crisis continues to reverberate "will probably keep Indian markets subdued in the near term," he said.

India has suffered as global investors sell off riskier assets. Foreign institutions, which played a key role in driving Indian markets up last year, on Friday pulled $349.7 million from the country, bringing net outflows for the year to $7.8 billion, according to the nation's securities regulator.

Such divestment has also put downward pressure on the rupee, which in turn has wiped out some of the gains India _a net oil importer_has enjoyed as the price of crude has eased, Shah said.

Satyam Computer Services Ltd., an IT consulting and service provider that employs 52,000, shed 9.45 percent Monday, while outsourcing giants Infosys Technologies Ltd. and Wipro Ltd., both lost more than 4 percent.

ICICI, the nation's largest private bank, closed down 3.82 percent, and HDFC Bank Ltd. was down 3.34 percent.

DLF Ltd., a real estate company, lost 7.54 percent, and Reliance Infrastructure lost 9.72 percent.