The Hindu Business Line : Late-hour selling sends Sensex down 390 points

As reports trickled in that rainfall for the week to August 5 was 66 per cent below normal, the Sensex fell 520 points from its intra-day high of 15,969 to its day’s low of 15,443. By the end of the day, it had tanked more than 380 points, shedding 2.5 per cent from its previous close. The broader Nifty fell 2.3 per cent.

There is concern and fear in the market that the Government might take a stand over the deficit rainfall and, in all possibility, declare a drought, said Mr Arun Kejriwal of Kejriwal Research Information Services. This could trigger a chain of events, ranging from demands for more funds to be pumped into agriculture to even a fall in GDP targets, he said.

Some, like Mr Gopal Agrawal, Head of Equity at Mirae Asset, said a fall in the market was overdue as it had been a one-way rally all the way from 13,300 to 16,000. (Over the week ended Wednesday, the Sensex had gained nearly 5 per cent.) The fall was accentuated by concerns over the monsoon, he said.

FIIs net sellers

Foreign institutional investors were net sellers for Rs 371 crore while domestic institutions were net buyers for Rs 257 crore, NSE data showed. According to brokers, there was basket selling of Nifty stocks by some FIIs, contributing to the fall in stock prices.

There are concerns over the Chinese market as it seems overheated, indicating that the FIIs might want to exit China and other Asian markets, said some analysts.

“We had a selective approach in buying, as we picked stocks that are expected to go up in the future and have the right valuations, such as mid-cap IT stocks and oil and gas stocks,” said a fund manager.

To some extent there was profit-booking by investors wanting to subscribe to the NHPC IPO, said brokers. There was huge pressure on the Nifty as Nifty futures were trading at a premium for most of the day but slipped later to a discount, indicating pressure on them, explained a broker.

Retail investors hit

Retail investors were caught offguard as the market, which had shown an upward trend after opening at a lower gap, fell sharply, said a broker. Mr Pankaj Shah, who had bought futures of Reliance and Nifty at Thursday’s high, was one of them. He said he would wait for a possible recovery tomorrow to minimise his losses.

“Retail investors were trapped as they had bought when the market was going up and found that it suddenly tanked,” said Mr Kejirwal.

“The retail investor generally does not have the courage to book losses, so in a fall like this he is stuck,” said a broker who was trying hard to sell shares at the best price he could get for his client.

All the sectoral indices ended in the red on Thursday.

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Late-hour selling sends Sensex down 390 points