The benchmark Sensex on Friday fell 301 points to a one-week low as a spike in consumer inflation and reports that the market regulator Sebi might tighten inflows through participatory notes hit the sentiment.
The index stayed in the negative zone throughout the day and touched a low of 25,400.27 before winding up 300.65 points or 1.17 per cent down at 25,489.57, its weakest closing since May 6. The 50-issue Nifty broke below the 7,900-mark by plunging 85.50 points or 1.08 per cent to close at 7,814.90.
The market was agog with reports that Sebi is planning to tighten due diligence requirements for issuance and transfer of P-Notes and put the onus on investors to ensure compliance with anti-money laundering law based on the recommendations of Special Investigation Team on black money. The move which is likely to be considered at the Sebi board meet on May 20 is aimed at curbing round-tripping and money laundering.
The new norms are expected to put the onus largely on the P-Note issuing entity to carry out reconfirmation of overseas derivative instruments (ODI) position on a semi-annual basis, submit reconfirmations reports or any breaches, capture audit trail of the beneficiaries and maintain record for excess holding above prescribed limit.
P-Notes now account for 10-12 of FII inflows, down from over 50 per cent in 2007.
Upsetting the market calculations of a rate cut by the RBI, the government data on Thursday showed that industrial production plunged to 0.1 per cent in March, while retail inflation jumped to 5.39 per cent in April. Banking shares ended sharply lower with SBI, ICICI Bank, Axis Bank and HDFC Bank down by up to 2.29 per cent.
Dipen Shah, senior vice-president, Kotak Securities said: “The IIP numbers had come in lower than expected whereas the CPI numbers exceeded expectations. Also, there were reports that Sebi is planning to tighten due diligence requirements for issuance and transfer of P-Notes and put the onus on investors to ensure compliance with anti-money laundering law.
The passage of Bankruptcy Law in the Parliament was a big positive.”
“Markets continue to consolidate around the current levels and investors are waiting for triggers. Quarterly results, monsoon indicators and global factors will dictate market sentiment in the near term,” he said.
According to Jayant Manglik, president, Retail Distribution, Religare Securities, the market was tracking weak cues from both domestic and global front.