Blood-bath continues; Sensex crashes 150 pts

MUMBAI, OCT 29: A combination of a lacklustre credit policy and profit-booking by leading foreign institutional investors FIIs sent the...

MUMBAI, OCT 29: A combination of a lacklustre credit policy and profit-booking by leading foreign institutional investors FIIs sent the Sensex crashing for the second day in succession. With today8217;s fall of around 150 points at one point it had fallen by 225 points 8212; the Sensex has in fact fallen a whopping 725 points over the last three weeks. In terms of market capitalisation, or the total market value of all shares, investors lost Rs 99,000 crore with the 725 point fall.

With the Sensex quite over-heated 8212; it crossed 5,150 on Oct 11 8212; FIIs have been selling stock to book profits, and buy later at lower prices. Along with the FIIs, big Indian investors have also been unloading their securities, partly because they had over-bought earlier, when they believed the market would do even better by Diwali 8212; with the FIIs selling, however, they also decided to exit the market for the time being.

Moreover, with most FIIs closing their books in December, they are keen to register the profits now. FIIs have pulled out over Rs 2,000 crore from the markets over the past two months 8212; so far in this month, they were net sellers of securities worth Rs 600 crore. And though the government task force has said that India is Y2K compliant, the FIIs aren8217;t taking any chances and are not too keen to increase their exposure to the country. quot;The increased political turmoil, with the Congress threatening to stall various bills, also dampened sentiments,quot; said a broker. The political news too was not so encouraging with reports indicating the second generation reforms were in danger following signals that the Congress party might vote against the Insurance Regulatory Authority IRA and other bills in the Rajya Sabha.

With the government talking of launching a reforms blitzkrieg ever since it came in, market-men were expecting a cut in interest rates in the new credit policy. But with the majority of nationalised banks still not quite ready to face increased competition, the RBI decided not to cut the prime lending rate any further. Market-men took this to mean the RBI was not going to usher in any quick reforms in the banking sector at least.

On Friday, Sensex opened marginally up at 4601.40 but later turned weak and dropped to the day8217;s low of 4368.85 around midsession. However, a modest recovery at the fag end lifted the Sensex to close at 4444.56 as against yesterday8217;s close of 4594.57, still showing a sharp fall of 150.01 points or 3.26 per cent. The BSE-100 index tumbled by 86.68 points to 2071.50 from previous close of 2158.18.

Moreover, the rationalised margin system on the BSE, introduced last Monday, forced a number of small operators to liquidate their position. Small investors have also joined the selling spree following the steep fall in Sensex in the last fortnight. Almost 95 per cent of the stocks in the specified list showed a sharp fall on Friday. The fall was triggered by Infosys which had fallen by nearly 4 per cent in the half-an-hour of the day. The selling then spread to heavy weights like ITC, Ranbaxy, SBI, MTNL, Bhel, and Reliance. However, during the later half of the day, SBI showed a sharp recovery which helped the Sensex recovery.

SBI managed to show a gain of over two per cent from its previous close. NIIT also provided some help with a recovery of over 8 per cent from its low. On previous close, it gained 4 per cent. The position in other index-based counters was far from impressive. In fact, counters like Ranbaxy, Telco, ITC, Infosys, Bhel, MTNL, and Castrol showed a fall of over 5.

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Almost all the sectors were affected by panic selling. The software sector was the main target. The selling which started with Infosys spread to other counters too.