Nifty dips 900 points on flash crash,recovers

Denying any glitch in its systems,NSE blamed the crash on erroneous orders placed by a dealer and said that it was investigating the incident.

Indian markets opened to a rude shock on Friday as barely 35 minutes into trade the Nifty at the National Stock Exchange NSE witnessed a flash crash as it fell by 900 points to hit an intra-day low of 4,888 leading the index to hit the lower circuit and thereby closing the cash market automatically for almost 15 minutes.

Denying any glitch in its systems,NSE blamed the crash on erroneous orders placed by a dealer and said that it was investigating the incident. It said that the Nifty fall and trigger of the circuit filter was on account of the entry of 59 erroneous orders amounting to over Rs 650 crore by a dealer of Emkay Global Financial services EGFS on behalf of an institutional client.

These non-algo market orders have been entered for an erroneous quantity

which resulted in executing trades at multiple price points across the entire order book thereby causing the circuit filter to be triggered. These orders have been identified to a specific dealer terminal, said the NSE adding that Emkay has closed out the positions arising out of erroneous trades smoothly and the member has been disabled from trading. With the markets having rallied by over 10 per cent in the last one month,the incident worked as a correction say some market participants. Many stocks had jumped by up to 30 per cent.

The correction was due and the flash crash acted as a trigger for the correction in the markets today, said SP Tulsian,an independent market expert. The Nifty,later,recovered and closed the day at 5,746.95 with a fall of 40.6 points or 0.7 per cent.

We have taken immediate action. Emkay Global Financial Services was asked to close out its positions arising out of erroneous trades,which they have done. The exchange then disabled the member from trading. There is no question of any glitch or malfunctioning in NSEs systems. The brokers dealer put in an erroneous quantity in the orders,which is being investigated, said Ravi Varanasi,head-business development at NSE. Emkay Global however did not come out with any clarification and its senior officials declined to talk.

Meanwhile,the flash crash in Nifty and concerns over the fate of big-ticket reforms,cut short a four-day rally in stock markets with BSE Sensex falling 120 points to close the day at 18,938. The Sensex had fallen by 301 points at around the same time of the crash at Nifty to hit an intra-day low of 18,757 before recovering.

How it happened

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At 9:50 AM,in a matter of 30 seconds,the total value of trades at NSE hit Rs 729 crore and share prices of all major companies witnessed a sharp decline. While RIL fell 21 per cent,ICICI bank fell by 20 per cent and Bharti Airtel shares plunged by 27 per cent within a minute. A market expert told The Indian Express that Emkay Global sold a basket of leading stocks aggregating to around Rs 700 crore in the market which led to the sharp fall. The basket included 2,34,000 shares of RIL,6,94,000 shares of ITC,1,48,000 shares of Infosys,2,40,000 shares of ICICI Bank and 1,75,000 shares of HDFC Bank among others. The source also confirmed that the shares were quoted at a discount of up to 27 per cent to their previous tick. Emkay would have booked losses amounting to up to Rs 140 crore on account of these trades, the source said.