The Hindu Business Line : Metals melt the markets

Black Monday
Erosion in investors' wealth over Rs 100,000 cr
Over 72 pc of top BSE counters end lower
Asian markets showed negative trends

A DAY OF SHATTERED DREAMS: The Bombay Stock Exchange building seen through a broken window screen of a car. — Paul Noronha

Mumbai , May 15

In yet another Black Monday, weak signals from global bourses, declining metal prices, and heavy selling by foreign funds sent domestic stocks into a tailspin, with the benchmark BSE-30 Sensex sliding 462.91 points (3.77 per cent) - its third biggest fall ever - to close at 11,822.20 points.

Dealers said that statements from Government catalysed the retreat, particularly the directive to cement companies to lower prices and continued indecision on petroleum price hike. Erosion in investors' wealth from Monday's slide is estimated at over Rs 1,00,000 crore.

The market's biggest single-day fall was recorded on April 28, 1992 when the Sensex fell by 570 points to 3,870 points during the Harshad Mehta scam. The second biggest fall was 12 years later on May 17, 2004 (regarded as the original Black Monday) when the index tumbled 565 points to 4,505 as the UPA Government came to power.

With today's slide, the Sensex has lost 788 points in the last three trading sessions. The NSE's S&P CNX Nifty index lost 147 points (4.03 per cent) to close at 3,502.95.

According to Mr Uday Kotak of the Kotak Mahindra Group, the market decline appeared to be triggered by the drop in metal prices. All the markets - equity, forex and commodities - are now integrated and investors need to take a holistic approach, he said.

"The markets were looking for some kind of an excuse. There is also selling pressure from foreign investors. They seem to be watching what steps the Government will take on the reforms front after the added weight gained by the Left parties," said Mr Dinesh Thakkar, Managing Director, Angel Broking.

Foreign funds, reportedly selling in the wake of higher US interest rates, were net sellers to the tune of Rs 812.43 crore today, according to provisional figures from the NSE.

The domestic markets opened weak after the Asian markets, including Nikkei (Japan) and South-East Asian bourses, showed negative trends.

"Earlier, whenever the markets fell, mutual funds used to enter in a big way. We feel that about 80-90 per cent of the funds mobilised through the new fund offers by the mutual funds have been invested.

"Due to this, there was no big buying support and this made the market weaker," said Mr Sashi Bhushan of ILFS Investsmart. Mutual funds have been net buyers this month for about Rs 1,500 crore.

Analysts said that a weak dollar also meant that foreign funds might pull out money from emerging markets.

The markets are expected to be weak on Tuesday too, as global cues don't look rosy.

Both the FTSE and Dax (Germany) indices were down on early trade.

The US markets also looked weak with both the Dow Jones and Nasdaq indices dropping further from Friday's close.

All 30 shares on the Sensex closed in the red.

The overall market breadth was also overwhelmingly negative, with 1,899 stocks (over 72 per cent) of the top 2,583 counters on BSE ending lower from Friday.

Cement (Gujarat Ambuja, ACC) and metal (Hindalco) stocks led the fall. Heavyweights Reliance Industries (down 4.50 per cent or Rs 45.80 to Rs 1,021.15) and ONGC (Rs 1,367.10, down Rs 50.15 or 3.54 per cent) also slipped from Friday's close. "It is going to be very difficult to make money from these levels. Retail investors need to be very cautious," said Mr Manish Shah (Head of Equity), Motilal Oswal Securities.

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