Pak retaliation sends Sensex, rupee crashing

The rupee went into a sudden tailspin on news of two Indian combat jets being downed in the Kargil conflict at around 1545 hrs, falling suddenly to 42.95. The downward trend continuedand the rupee went down further to 43.05 and subsequently to 43.11/15. The rupee eventually closed at 43.07, showing a net loss of 25 paise from the previous close of 42.83.

Said K N Dey of Mecklai & Mecklai, “the market is nervous. If the situation at the border deteriorates, the rupee will come under tremendous pressure, forcing the Reserve Bank of India to clamp fresh restrictions.” However, the RBI did not intervene in the market today. “After the news of the IAF planes being shot down came in, corporates and importers rushed to take cover and this led the rupee to crash,” said a senior dealer.

On the other hand, stock markets across the country crashed as operators unloaded shares after the news about the flare up reached the market. Pivotals which initially showed signs of recovery during the mid-session, fell at the end pushing Sensex down by another 110.85 points (2.79 per cent). The crash was mainly due to panic selling generated by Kashmir reports.

Operators reacted strongly to the news ofretaliation by Pakistan, resulting in brisk selling by speculators who rushed to lighten their commitments on fears of another Indo-Pak war.

Sensex opened marginally down at 3963.76 but later recovered smartly at mid-session and even rose to a high of 4016.74. However, it dropped sharply to close at the session’s low of 3862.45 with a sizeable loss of 110.85 points compared to the yesterday’s close of 3973.30. The BSE-100 index also dipped by 41.00 points to 1678.20 from previous close of 1719.20. The S&P CNX Nifty index of the National Stock Exchange (NSE) also fell sharply by 44.05 points to 1091.45 as against the previous close of 1135.50.

Operators said though trading in the morning had started on a cautious note, the market witnessed a bullish phase on good buying interest from players coupled with short covering by operators. Sensex bounced back to 4016.74 on speculative support but crashed by more than 154 points from the day’s high immediately after the report reached the market.

Marketmen fearthat prolonged tension at the Indo-Pak border could have a devastating effect on the economy which had just shown some signs of recovery from the global recession. “Any war is not good for the economy. What we need is economic development not a war,” said an NSE dealer.

There were hardly few gainers in the market like Hindustan Ink, Smithkline Bech, Ashok Leyland, Novartis in the falling market. Brokers said the market is likely to react further on Friday. Out of 149 specified scrips, only 15 shares showed modest gains on institutional support while 129 shares declined on panic selling and five remained steady.

Satyam Computers clocked the highest turnover of Rs 194.05 crore of the total volume of business of Rs 1401.53 crore much lower than Rs 1658.17 crore posted yesterday. Satyam Computer fell by Rs 55 to Rs 1405 on bull unloading. SBI lost by Rs 13.50 to Rs 237, Pentafour Software Rs 48 to Rs 1095, Ranbaxy Rs 12 to Rs 612, ITC Rs 45 to Rs 1028, Hindustan Lever Rs 30.75 to Rs 2284.75, Reliance Rs6.80 to Rs 157, Telco Rs 3 to Rs 172.50 and Tisco by Rs 3.30 to Rs 107.20 on selling pressure.