The Hindu Business Line : Sensex crashes 1408; markets in bear grip

Mumbai, Jan 21 The country’s stock markets were hit by a tsunami wave of selling that saw the benchmark index of the BSE shed 2,000 points intra-day before rallying marginally later in the afternoon on Monday.

Marketmen put it down to a combination of weaker global economic outlook, liquidity sucked out by a couple of recently launched IPOs and forcible liquidation of securities pledged by investors who were unable to meet the margin on their outstanding loans.

According to the provisional data with the exchange, the foreign national investors sold shares worth Rs 3,296.73 crore worth of shares, while the domestic investors were net buyers to the tune of Rs 3,399.20 crore.

Retail investors also bought shares worth Rs 421.39 crore even as proprietary trading offloaded shares worth Rs 534.16 crore.

Reasons

“It’s a cascading effect of a combination of global factors where FIIs have been selling, money sucked out by the two IPOs of Reliance Power and Future Capital and margin selling that brought down the market,” Mr Anil Advani, Head of Research, SBI Capital Securities, said.

There was a pullback towards the close. Sensex finally closed 1,408 points down at 17,605 suffering a 7.40 per cent loss. NSE’s CNX S&P Nifty was down even further closing 8.70 per cent lower — a loss of 496.50 points at 5,208.

There was hardly any stock that survived the day’s bloodbath as stock after stock ended lower. All the Sensex stocks ended in the red; the BSE 100 did likewise. Only two of the BSE 200 stocks and just five of the BSE 500 survived the red coat.

Overall, out of 2,811 stocks traded on the BSE today just 139 advanced and a hefty 2,657 scrips ended in the red.

Risk awareness

“The fall needs to be seen in the context of the sharp run-up witnessed in the last quarter of 2007 and increasing volatility in the global markets amidst concerns about future economic growth.

In that sense, this consolidation being witnessed in recent days is largely due to growing risk averseness in global markets was along expected lines,” Mr Sukumar Rajah, CIO - Equity, Franklin Templeton Investments, said

Mr Raamdeo Agrawal, Co-founder and Director of Motilal Oswal Financial Services Ltd, credited the fall, among other things, to irrational exuberance in the IPO market and local valuations that had become too optimistic. But he expected things to improve.

There has been a build-up of investments funded at the margin if the NSE data is anything to go by.

Trades carried out at the ‘margin’ had gone up by more than Rs 80 crore since December 1 last year.

Among the pivotal stocks at the BSE, Reliance Energy, ACC and Bajaj Auto lost more than 15 to 16 per cent. NTPC, Reliance Communication, Hindalco and DLF fell between 10 and 15 per cent.

Reliance Petroleum fell more than 25 per cent intra-day before closing with a loss of 17.53 per cent.

Mid-caps badly hit

Mid-cap stocks were hit even harder. Some of the stocks that saw a mad bull run in recent times were brought down to earth. Essar Oil fell 31.55 per cent at Rs 185.75, Nagarjuna Fertiliser fell 31 per cent to Rs 42.65, Housing Development and Infrastructure Ltd over 28 per cent and sugar company Bajaj Hindustan also fell over 28 per cent.

Even brokerage stocks were not spared.

“Stocks of most brokerage stocks too lost around 19-20 per cent”, said Ms Anita Gandhi, Head of Institutional Buiness, Arihant Capital Markets Ltd.

Recently listed Edelweiss Capital fell by 21 per cent; India Infoline’s final tally showed a fall by 15.60 per cent and Motilal Oswal Financial Services lost 13.09 per cent while their intra-day losses were close to 20 per cent as per the BSE data.