Panic St: Sensex tanks by 330 pts

The benchmark BSE Sensex tanked by 330 points or 6% to 5,069.87, its biggest fall in the last four years. The S&P CNX Nifty ended with a loss of 135 points or 7.8% to 1,582.40. The loss for the investors during the day: Rs 1,00,000 crore. Market capitalisation, or investors wealth, plunged by 8.8 pc to Rs 10,51,525 crore in a day.

Said A. Balasubramaniam, Head (fixed income), Birla Sunlife AMC, ‘‘The market has tanked on expectations and global trends. The fundamentals of the economy are otherwise good. There has been negative news from the coalition partners. This is of course not a market for the small investor.’’ Investors started unloading after news reports about the increasing role of Left parties in the new government hit the market.

The demand of Left parties to stop disinvestment and scrap the ministry sent jitters among market players. Local funds, retail investors and foreign funds all dumped the shares in delivery-based orders. Foreign investors were upset by the prospect that the new government may adopt populist measures with an emphasis on sops to agriculture rather than moving on with the reforms and liberalisation process. Several hedge funds also joined bear bandwagon.

The Congress is set to form government at the Centre with support from the Left Front. This has increased concerns in the market that a more leftist agenda like subsidised loans to farmers might be the focus of the new government and economic reforms may be marginalised. The new Congress government in Andhra Pradesh, which swept the polls there, has already promised free power to farmers.

These concerns sent PSU stocks crashing. The magnitude of the fall scared retail investors who joined the selling spree. GAIL, MTNL, RCF, Indian Oil, BEML, HPCL and BPCL plunged by 10-20 pc.

Dealers said margin calls were hit after the sell-off, adding to the fall on the bourses. Margin calls are hit when the stock falls below a particular level. Traders also resorted to selling to cough up additional margins that exchanges would demand on outstanding futures and options positions following the market crash.