Rumours send stocks crashing

MUMBAI, AUG 25: The Indian Express is carrying an expose by its columnist Sucheta Dalal on the huge outstandings of a top broker on the B...

MUMBAI, AUG 25: The Indian Express is carrying an expose by its columnist Sucheta Dalal on the huge outstandings of a top broker on the BSE and his dealings with a top financial institution, pro-Congress party brokers are going to dump shares over the next few days to spoil the BJP8217;s post-Kargil high, the Chinese have devalued the yuan and a global crash is imminent, and home minister L K Advani has been shot dead.

These, and a whole series of rumours swept across the country8217;s top bourses, the BSE as well as the NSE, and lopped off a little over Rs 30,000 crore from the combined wealth of shareholders. After opening 20 points over yesterday8217;s close, the BSE sensex touched an all-time high of 4,826 within a short while this morning. And then the rumours started.

The sensex plunged 217 points by 2:40 pm and then recovered somewhat, to close at 4,718. Market sources allege several brokers who started the panic selling later bought back shares at lower levels. Later, the Securities and Exchange Boardof India SEBI asked the exchanges to take proactive surveillance measures to ensure not just safety but also integrity of the markets. 8220;Though the risk cover available with the leading exchanges, in terms of margins collected on Monday alone stands at over Rs 2,800 crore, we felt proactive risk containment measures must be taken at the exchange level,8221; said Sebi executive director L K Singhvi. It was also decided that weekly reporting of the exchanges should be more qualitative rather than being quantitative and include matters taken up for investigation or disciplinary action.

After Sensex crashed by 216 points to 4609.98, operators rushed to cover their short positions resulting in partial but smart recovery that lifted the sensex by over 109 points to close at 4718.73. The BSE-100 index also dropped by 43.08 points to 2120.98 from previous close of 2164.06.

Bear groups, who were caught off the guard by the sustained rally in share prices in the last fortnight, were all out to pull down the market.If Sensex crosses 5,000, bears fear the market would go out of their hands. 8220;What really worries me about this rally is that it has been going on too long without any retracement,8221; said an official of CS First Boston.

FIIs who had invested around 1.176 billion in 1999 had pulled out funds in August. While retail participation in the rally has been strong, institutional investors have been sellers. Data released by the market regulator SEBI showed foreign funds have sold a net 70.6 million in August till Monday compared to net purchases of 359.2 million in July.

In the specified group, Tata Power, Apollo Tyre and Guj Alkalies hit the lower circuit filter after exhausting the daily limit of eight per cent while Escorts rallied smartly and was locked in the upper price band. Of the 148 traded specified shares, 127 registered sharp to moderate falls while 20 showed modest gains and one remained steady. Only seven out of 30 index-based scrips survived to close in positive territory.