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Monday mayhem mauls markets

Mumbai, March 15: Every point cost Rs 200 crore. By the time the Dalal Street shed 180 on the sensex, investors were poorer by Rs 36,000 crore in a plunge that took the markets to levels unseen since December 19.

At 5520.66, the country’s best-known barometer of stock appetite was a pale shadow of the gushing gauge it was until a rash of public issues sucked the steam out of it. The value of all shares listed slid to Rs 11,85,000 crore today.

No one was sure why bourses were bleeding the way they were this afternoon — a day after the ONGC issue closed with an unprecedented response from investors.

Brokers found it difficult to say what went wrong, though the overweening opinion blamed it on the public-offer scramble. “I have no clue,” said a dealer. Others said year-end pressures on mutual funds from companies facing tax payment deadlines, led to a selling spree.

“Firms that park excess cash in units of mutual funds are calling back their funds, forcing mutual funds to sell investments in the market to pay their investors,” a dealer affiliated to a large broking house said.

Some said the trend was in line with those on Asian bourses. “It started with a gap, heartened by the oversubscription in ONGC, and later fell like nine pins. Hedge funds were selling big on almost all major Asian bourses,” said Navin Roy, a dealer at Taib Securities.

Elections are also big worry, enough to keep stock markets on the edge. “The run-up to the polls will see a lot of surveys and the market will react to the projections when they are made public,” a fund manager said.

The benchmark 30-share index opened at 5745.06 but nose-dived to a low of 5505.98 before closing at 5520.66, a decline of 3.15 per cent over 5700.40 on Friday.

The selling was across the board. There were unconfirmed reports during the session that Fidelity, a key foreign fund with millions at stake in Indian shares, also dumped stocks for cash.

Bruised in the selling avalanche were Reliance Industries, Reliance Energy, ACC, Satyam, HPCL, ICICI Bank, ITC, L&T, ACC, Bajaj Auto, Hero Honda, Ambuja, Grasim, Hindalco, SBI, Tata Power, Tata Motors, Tata Steel, Wipro, Bajaj Auto, Cipla and Dr Reddy’s, MTNL and ONGC.

Bombay Dyeing, HCL Info, Nestle and Gillette (I) were among the few that closed in positive territory, finding support from individual investors and local funds.

In the specified group of BSE, 173 shares, including 30 that make up various indices, suffered sharp setbacks; just a handful, 19 to be precise, closed with gains.

The drubbing in Reliance alone took at least 29 points off the sensex as the scrip slipped Rs 20.50 to Rs 542.95.

Derivative lots

Investors gave a cold reception to reduced lot sizes in derivative contracts, but there are expectations of a pick-up.

Dealers said as the lot size came down, there was a sharp rise in the number of deals. “While the lot size was reduced to enable retail investors to bet, the first day showed that they were not willing to bite the bait. Moreover, exchanges were finding it difficult to cope with the increased number of trades,” a dealer pointed out.

He said the principal reason for the subdued interest of retail investors was the sharp fall in equity values in the cash segment.

A directive from the Securities and Exchange Board of India (SEBI) forced stock exchanges to bring down the lot sizes of most of the derivative contracts. In the case of Tata Motors for instance, the lot size was brought down to around 825 shares against the earlier contract of over 3000 shares. The move has been aimed at attracting a larger number of small investors.

Meanwhile, the National Stock Exchange said the total turnover in its futures and options segment was around Rs 13359.12 crore.

Rupee hardens

The rupee gained further ground against the dollar today, closing at 45.24 compared with Friday’s finish of 45.26.

The advance was fuelled by a weakness of the greenback against other major global currencies today. Dollar supplies over the weekend gave the rupee a firm underlying support in the absence of adequate import and corporate dollar demand, dealers said.

The outlook on the rupee remains positive due to increased dollar inflows from foreign institutional investors (FIIs) into shares of PSUs where the government is selling its stake. Also, foreign exchange reserves shot up to $109.13 billion on March 5 from $108.36 billion a week earlier, according to the Reserve Bank’s weekly statistics.

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