Sensex falls 148 pts as bears return

The Sensex plunged 147.83 points or 1.9 per cent to settle at 7,606.17 in the selling avalanche. The S&P CNX Nifty lost 36.80 points or 1.5 per cent to settle at 2,324.40.

Monday’s correction followed a steep rise in the market in the last few weeks. In what was one of the steepest rallies, Sensex jumped nearly 500 points in mere nine trading sessions between July 22 and August 4. Heavy inflows from FIIs were instrumental in sending the stocks to dizzy heights.

‘‘The magnitude of the fall indicates huge selling by hedge funds. The market was overheated in the last few days. There was no reason for the sustained rally in the last one month. I have been cautioning investors about the unreasonable price levels in the last few days,’’ said NSE dealer Pratip Bhavnani.

When contacted, a cross-section of market experts said the correction was long overdue. As the Sensex was rising without the backing of fundamentals, a further fall is not ruled out.

There are fears that a steep increase in US interest rates may result in slowdown in inflow from hedge funds across emerging markets. Low US interest rates have been one of the major reasons for the surge in FII inflow across emerging markets including India in the past few months and therefore fears of a steep US interest rates hike triggered sell-off.

The identity of foreign investors who were putting money in Indian stocks was not known as a major chunk of FII money is coming in as unregulated participatory notes.

The market remained weak for most of the trading sessions and selling pressure accentuated in the latter part of the trading session. ICICI Bank witnessed a sharp fall in late trading. Disappointing July vehicle sales numbers cast their shadow on Tata Motors. Selling was conspicuous in bank and refinery shares.

In an otherwise weak market, ONGC rose due to rising global crude oil prices. Select side counters spurted in an otherwise weak market. RIL lost 2 per cent to Rs 710.55.