Sensex tumbles to lowest close since mid-2006

By Sumeet Chatterjee

BANGALORE (Reuters) - Indian shares shed 5.7 percent on Friday to their lowest close since June 2006, collapsing in afternoon trade as fears of a looming sharp global economic slowdown kept investors wary of risky assets.

The selloff started after U.S. index futures fell more than 2 percent indicating a sharply lower open on Wall Street, which also led to European stocks paring their gains.

"The pain is going to be there for a long, long time," said Daljit Kohli, head of research at Emkay Global Financial Service. "The risk aversion has gone up significantly on growing global as well as local headwinds."

Heavy selling by foreign funds as the global financial crisis deepened and cuts in guidance by companies added to the gloomy outlook, traders said.

Satyam Computer Services cut its revenue guidance as technology spending was hit by the global financial turmoil, one week after bigger rival Infosys Technologies

lowered its forecast.

The 30-share BSE index ended down 5.73 percent, or 606.14 points, at 9,975.35, its lowest close since June 20, 2006. All the index components closed in the red, with 20 stocks falling more than 5 percent.

The benchmark, which has lost more than half its value this year, had risen 1.9 percent in early trade before tumbling as much as 6.3 percent in the afternoon.