Border tension pulls down Sensex, rupee

MUMBAI, MAY 26: The air strikes on the Indo-Pak border dampened the financial markets across the country on Wednesday. Panic selling by m...

MUMBAI, MAY 26: The air strikes on the Indo-Pak border dampened the financial markets across the country on Wednesday. Panic selling by major players including foreign funds pulled down the benchmark Sensex by 87 points as stock prices fell after India launched a series of air strikes to clear Pakistan backed infiltrators in Kargil, Jammu amp; Kashmir. On the other hand, the rupee also reeled under the impact of the border problems and fell by 8 paise to 42.83 against the US dollar.

Share prices started falling as soon as reports that India had launched attacks against infiltrators from Pakistan reached the markets. Both punters and financial institutions indulged in heavy selling. There was panic selling of software, pharma, FMCG and cyclical shares and Sensex fell below the 4,000 level.

Marketmen were worried over the incidents at the Indian border. 8220;If the tension escalates, there will be problems on all the fronts. Otherwise, the market may stabilise in the next couple of days. Foreign investors arealso keenly watching the developments,8221; said a senior analyst. Another dealer expressed the hope that Pakistan would not resort to retaliatory strikes.Sensex which started on a steady note dropped by nearly 138 points during the day but recovered partially at the end. Sensex crashed from the earlier high level of 4087.65 to the low of 3921.76 but recovered thereafter to finish at 3973.20 with a sizeable loss of 86.78 points compared to the previous level of 4060.08. The BSE-100 index lost 37.69 points to 1719.20 from the previous level of 1756.89. The National Stock Exchange NSE also witnessed selling pressure with the Samp;P CNX Nifty index falling sharply by 24.70 points to 1135.50 as against the previous close of 1160.20.

Brokers said pivotals like Tata Power, Apollo Tyre, Andhra Valley and Tata Hydro hit the lower circuit filter after exhausting the daily limit. Operators were optimistic that the situation will be clear within a couple of days and the market is likely to move upwards once the correctionis over. Out of 30 Sensex scrips, only ACC, Infosys Technologies, Nestle and Novartis showed moderate gains.

Pentafour Software continued to be the most active scrip with a turnover of Rs 219.60 crore of the total volume of business of Rs 1658.17 crore. But the scrip lost by Rs 57 to Rs 1143 on selling pressure. SBI dipped by Rs 14 to Rs 250.50, Reliance by Rs 6.30 to Rs 163.80, ITC by Rs 1.90 to Rs 1073, Satyam Computer by Rs 68 to Rs 1460, Hindustan Lever by Rs 14.50 to Rs 2315.50, Telco by Rs 9.30 to Rs 175.50 and Tisco by Rs 4.10 to Rs 110.50.Meanwhile, the increasing tension at the Indo-Pak border following air strikes by India cast its shadow on the interbank foreign exchange forex market with the rupee shedding 8 paise to 42.83 against the dollar.

The Indian unit opened stable at 42.74/75 and hovered in a narrow range till as late as after the mid-session. The news of the air strikes led the rupee to depreciate at around 1300 hrs. The trend continued for the rest of the day as market participantswere covering their open positions and buying fresh dollars as they felt that the downward trend might continue in the coming days. The rupee was traded at 42.84/85 during in the post mid-session. The rupee ended at 42.83 as compared to 42.75 during the previous session.

8220;If the tensions on the border escalate the rupee may slide further tomorrow,8221; said a dealer, adding that corporates were worried that Indian air strikes could lead to retaliatory strikes from Pakistan. 8220;Corporates and banks were seen actively bidding for dollars in early trades. Corporates and banks appear to have used the rupee8217;s fall today to book profits given that the rupee has been holding firm for some time now,8221; said a dealer.