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Journalism of Courage
MUMBAI, MAR 24: Share prices and indices showed huge volatility on the Bombay Stock Exchange on Wednesday. Sensex crashed by 154 points in intra-day trade as market panicked on news about BSE president J C Parekh being asked by the Securities and Exchange Board of India (SEBI) to step down from his post and the crash in other world markets. However, the market recovered later but Sensex still showed a loss of 74.81 points at the close.
After touching 3772.95 in the morning session, Sensex plummeted to the day’s low of 3618.60 in the afternoon as speculators pressed sale on all the counters. The market, however, climbed back later to close at 3682.69 points, still 74.81 points lower than the previous close. The BSE-100 index also dipped by 33.57 points to 1619.85 from previous close of 1653.42.
“The exchange opened this morning on an optimistic note with operators continuing their buying spell. However, with rumours coming in that SEBI has asked the BSE president to resign, the fall in the south-eastAsian markets coupled with the fall in Nasdaq yesterday led to the dramatic fall in the market,” said a BSE broker.
Software counters led the headlong fall as rumours spread that one of the main broking firms active in many second rung software counter is barred from trading due to its association with the BSE president. The fall was severe in the case of second rung software scrips as the top line software scrips was already pared in the previous sessions. Infosys closed 4.12 per cent lower at Rs 2790, NIIT down 5.46 per cent at Rs 1998, Satyam down 4.5 per cent at Rs 1479 and Pentafour software down by 3 per cent at Rs 1108.
The fall was also broad covering the entire market, with all the 30 Sensex scrips, except three, closing lower. Among the survivors today were index heavy weights HLL, Mahindra & Mahindra and Telco. At the NSE more than 800 out of the total of 1600 scrips traded scrips came up for auction, which is sort of a record at the exchange. Due to this, the big price difference betweenBombay and National stock exchanges continued today as the auction session is conducted after the normal trading hours.
The high volatility was accentuated by the fact that there was only just one trading session left in this settlement as BSE is closed on Thursday because of `Ram Navmi’. Most operators either wound up or covered their intra-settlement positions due to this factor, and led to the last minute recovery.
As usual the crash gave rise a host of rumours, ranging from a fall in international markets to a crack down on some of the major market operators. Parekh was forced to step down from his post following SEBI finding his involvement in the price rigging incidence involving Sterlite, BPL and Videocon in June last year. Adding to the panic was the huge outstanding position at the BSE, amounting to around Rs 1600 crore which is almost double the normal case.
A section of the market expect the downward trend to continue for some more time. "The market will see another correction with the indexlikely to fall to 3,500-3,550 levels before moving up again. With a net gross outstanding position of Rs 2,000 crore the downward correction was bound to happen before the index could improve again on a sustainable basis," said Hitesh Zaveri, fund manager at Apple Mutual Fund.
Greenspan’s comments cast gloom
HONG KONG: Asia’s economic outlook has darkened following comments by US Federal Reserve Chairman Alan Greenspan which hinted at an end to the run of US rate cuts. The changed US outlook could mean higher costs for Asian borrowers, and more downward pressure on regional currencies under the weight of a stronger US dollar, analysts said. Although most analysts said Greenspan’s comments meant Asia’s hard-pressed companies would have a tougher time raising capital on international debt markets, some said the outlook for continued strength in the US economy could also mean sustained demand for Asian exports. In his bi-yearly report to Congress, Greenspan said the US economy was so vibrantthat recent interest rate cuts may have to be reconsidered, spelling the end to the series of three rate cuts that helped stabilise global markets late last year.
