Political tremors pull Sensex down 119 pts

MUMBAI, JULY 19: Nervous selling during the last hour of trading shaved off 119 points from the benchmark Sensex on Wednesday. Stocks nose...

MUMBAI, JULY 19: Nervous selling during the last hour of trading shaved off 119 points from the benchmark Sensex on Wednesday. Stocks nosedived after the news of three Union ministers8217; resignation from the BJP-led government at the Centre percolated into the market.

While FIIs continued their selling exercise, what precipitated Wednesday8217;s fall was the news of the resignation by three Sena ministers from the Union Cabinet. The initial decline was mainly attributed to FII selling on last Friday and Monday, totalling Rs 664 crore. This made operators nervous and they also joined the selling bandwagon. The market, which opened weak, turned distinctly feeble as the news of the resignation by three Sena ministers filtered in the market during mid-session and investors offloaded nervously.

A sharp drop in Sensex could be gauged by a steep fall in 28 out of 30 index-based shares. A downward reaction of over 97 points on the Nasdaq stock market last night also partly affected the market sentiment. Reflecting the bearish trend, Sensex resumed distinctly weak at 4672.19 and immediately touched the day8217;s high of 4721.85. But a large scale unloading by bull operators knocked down the Sensex to a low of 4604.54 before closing at 4616.01 as against yesterday8217;s close of 4734.80.

8220;The market was already weak in the opening session. When the news of the resignation of Cabinet ministers spread the market, stocks took further beating,8221; said BSE dealer Pawan Dharnidharka. Sensex has fallen by over 348 points in the last five sessions.

According to brokers, the tardy approach of the government towards disinvestment was another reason for the downturn in the sentiment. Although the resignation of Shiv Sena ministers was not expected to create any crisis for the Vajpayee ministry, marketmen were worried about the implications.

Among the index-based counters, HLL, ITC, Reliance, Infosys, Satyam Comp, Zee Tele, SBI come under strong selling pressure, and dipped sharply. In fact, stocks like Lamp;T and Bhel dipped below 8 per cent circuit levels. Meanwhile, the sentiment for the software segment was equally bearish. Almost all the software stocks showed a negative close. Global Tele, Dig Equipment, Pentamedia, Infosys and DSQ Soft declined sharply.

With Monday8217;s Rs 460 crore 103 million sale, FIIs have since June to date pulled out a whopping 402 million or Rs 1800 crore from the Indian stock markets. Mutual funds too have been net sellers in equities. Domestic mutual funds have sold net of purchases Rs 795 crore since the beginning of June to todate. The twin effect of domestic and foreign funds selling selectively, but consistently has seen the market slipping into the hands of speculators.

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Market players expect that whatever negative developments have taken place on the political front may not worsen further. The Prime Minister has not accepted the resignations of his ministers, all from the BJP ally Shiv Sena. 8220;We expect the negatives to be contained at this level only. We are keeping our fingers crossed,8221; said a dealer with a local brokerage.

According to a dealer with a domestic broking house, earlier the FIIs were selling in the ICE sectors, but over the last two days they have also sold in old economy stocks. 8220;This is not a very good sign as it has all the ingredients to further weaken the market,8221; said the dealer.