The Hindu Business Line : Sensex crashes 826 pts

Dalal Street experienced its worst single day crash on Thursday, as an ambiguous Government circular on taxing investment gains prompted foreign funds to book profits, knocking the bottom off the jittery stock market.

Opening amidst weak global markets and reports of rising US interest rates, the BSE-30 Sensex went on to close 826.38 points or 6.76 per cent lower at 11,391.43, beating the previous record of 570.42 points registered on April 28, 1992 following the Harshad Mehta scam. NSE's S&P CNX Nifty Index slipped 221.3 points or 6.09 per cent to 3,413.80.

Dealers said the fall was accentuated by large-scale selling of client positions by broking firms due to margin calls or the lack of margins.

The crash wiped off investor wealth to the tune of Rs 2,23,416.1 crore on the BSE. "People are hurt badly. Recovery from here on will be cautious and slow," Mr Ramdeo Aggarwal, Managing Director, Motilal Oswal Securities Ltd, said.

Though HNIs and retail investors would have lost much money, experts said, broking outfits would be fully covered due to strict norms on margins by the regulator. The market could find its feet tomorrow following the Finance Minister's clarification on the FII tax proposal, but the undertone remains weak.

Rupee dips

Tracking bourses, the rupee dipped against the dollar, though modestly. The domestic currency opened at 45.33, lower than Wednesday's close of 45.19/20. It touched an intra-day low of 45.62 but closed at 45.44/45.

Dealers said the RBI had possibly intervened at the intra-day low to reduce volatility .

Mr V. Rajagopal, Chief Dealer, Forex, Kotak Mahindra Bank, said, "The correction at the domestic stock market implies a slowdown in foreign fund inflows. This has cast pressure on the rupee."

FIIs net sellers

Foreign funds were net sellers for Rs 865.39 crore on the cash market on Thursday, rendering their total investment in May almost nil. This means they have been net sellers for Rs 3,767.20 crore since the market peak of May 11.

Bearish sentiment gripped the market as one negative report after another filtered in during trading hours, dealers said.

Other indices including BSE100, BSE500, BSE Small Cap and BSE Mid Cap fell in the range of 6.30-6.90 per cent. All the shares on BSE30 and BSE100 slipped into the red; only five stocks from BSE500 hung on in the green.

Market breadth was overwhelmingly negative with 2,241 stocks in the red against a mere 288 advances. The crash did not spare any sector or company with cement and metals among biggest losers on Sensex, down 9-11 per cent. At its result briefing Thursday evening, Dr T. Mukherjee, Dy. Managing Director , Tata Steel, said, "Our market cap at end-March was Rs 29,688 crore. I don't know what it is now."

With Thursday's sell-off experts felt the 3-year bull-run on Indian stock markets had been halted. "We may have seen the market peak for this year," an official at a foreign brokerage said.

However, Mr Jaideep Mehta, Managing Director, Techno Stocks, said the markets would bounce back Friday, courtesy the clarification by the Government. "As per the clarification, only day traders will be impacted," he said.

The Sensex has shaved off 1,279.68 points from the peak of 12,671.11 registered on May 11. "The markets were at a very high altitude and had not had reasonable correction in a significant amount of time. All earlier corrections were short-lived ," Mr Nirmal Jain, CMD, India Infoline Ltd, said.

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