London blasts and surging oil lead to market crash

07 July 2005

When the indices opened marginally in the positive and the Sensex crossed 7300 early in the morning, not many traders would have imagined the kind of carnage that awaited them later in the day.

The markets saw some selling pressure within an hour of opening as selling in oil stocks, especially ONGC and Reliance, pulled down the indices. Steel stocks held firm on continued buying interest as did most bank stocks.

A very positive market outlook report with a substantially high target for the Sensex from a major domestic brokerage and a strong buy call on Infosys by a major foreign brokerage helped the indices to stage a smart recovery.

The recovery did not last long as profit booking emerged later in the afternoon. As the indices were drifting down, the news of the London blasts came in along with reports of large sell-offs in most European markets.

Indices tumbled well over a per cent each in no time as a sense of panic spread through the market. News reports indicating that the London blasts may have been caused by electrical fault and not by terrorists led to a partial recovery.

The last half hour saw more panic selling as news reports confirmed terrorist involvement in the blasts and the indices closed almost at the lows of the day.