Domestic bears pulling the markets down to make fast bucks

Who pulled down the Sensex by 717 points on Thursday? It’s not foreign institutional investors...

Who pulled down the Sensex by 717 points on Thursday? It’s not foreign institutional investors (FIIs) if figures released by the Securities and Exchange Board of India (Sebi) are any indication. FIIs were net buyers to the tune of $31.20 million (Rs 125 crore) on Thursday when the market reeled under huge volatility and selling pressure.

According to the Sebi, FIIs bought shares worth Rs 8,355 crore and sold Rs 8,229 crore worth of shares, thereby making a net investment on a day when the Sensex showed an intra-day fall of 944 points and a swing of 1,428 points. “It’s clear that local bears took advantage of the situation and pulled the market down. Everything is now going in favour of bear operators. They floated rumours like a hike in margins to sell the shares and blamed FIIs for the crash,” said a market source.

Said BSE dealer Pawan Dharnidharks, “Sebi should investigate who pulled the market down on Thursday. The market will rise and fall but it should not be through motivated buying and selling which will result in destabilisation of the market.” Finance minister P Chidambaram said that motivated rumours by Mumbai broker circles had brought down the stock market on Thursday.

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On Wednesday — after the Sebi issued the proposals to curtail the use of PNs — FIIs had pulled out $440 million. This withdrawal has come after FIIs invested close to $5.35 billion in October alone, taking the total investment for the year 2007 to $17.57 billion.

Chidambaram had repeatedly said the government has no intention of imposing controls on capital flows but the amount of funds coming into the country necessitated some measures to moderate the flow for the time being. “Let me assure you that we have no intention of imposing controls on capital flows, nor do we intend to keep out certain kinds of funds,” Chidambaram had said in New York.

Meanwhile, the market again witnessed volatility and selling pressure on Friday. The BSE Sensex settled 438.41 points or 2.44 per cent lower at 17,559.98. It opened slightly higher at 18,031.77 and then immediately started declining sharply. The Sensex hit a low of 17, 226.18, on intense selling pressure. At the day’s low of 17,226.18, the Sensex had lost 772.21 points for the day. It oscillated 805.59 points in the day.

With the decline on the third consecutive day, the Sensex has fallen close to 1,500 points — from 19,051 on Tuesday — since Sebi came out with the proposal to curtail PNs and moderate the FII flows.

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