The Telegraph
Since 1st March, 1999
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Plunge fails to break hearts
Slide show comes under Sebi scanner

Mumbai, April 27: In the wreckage of the market crash stood optimists who saw Tuesday’s tremors as the fleeting outcome of jangled nerves on stock exchanges, and a watchdog sniffing around for foul-play clues.

A large section of the movers and shakers on the bourses believe today’s turmoil was little more than a knee-jerk reaction of a market already put on the edge by exit polls after the first round of ballots. These surveys narrowed the National Democratic Alliance-Congress chasm.

The Securities and Exchange Board of India (Sebi) had its own take on the day’s plunge — it suspected that the largest fall since March 13, 2001 could have been orchestrated. Acting on this instinct, it asked exchanges this evening to furnish data on the day’s trading pattern. “The regulator is closely watching developments in the market and has sought data from bourses on the trading pattern,” an exchange official said.

Quite curiously, the selling wave was not unleashed by foreign funds — known to scoot at the first sight of trouble — but by retail investors and operators with little patience to hold on. “It is not the foreign investors nor the big institutions who sold. It could be retail investors or operators,” a leading broker said.

Analysts had a litany of reasons to offer for the slide, besides poll pangs. One of them was the long weekend — Mumbai took Monday off to vote — that has left investors with little time to take an informed decision.

The way the day began on Dalal Street was as important as it ended. The sensex opened 57 points below its last finish. It has not had such a poor start since it resumed 120 points lower on September 12, 2001 — the day after the 9/11 terrorist strike in New York.

Operators, fed incessantly with TV exit poll results showing a thinning NDA lead last night and newspaper reports painting the same scenario this morning, jabbed the panic-button the moment trading started.

Bank shares were also hammered, but for a different reason. Analysts say it was because of the recently announced curbs on their freedom to declare dividends; indices tracking only bank shares were in the red, some of them giving up 5 per cent over their last close.

Another factor driving sellers was the end of futures contracts on Thursday. This prompted operators who had bought heavily in the past few sessions on buoyant corporate results, to wind down holdings.

“They ate too much, and so they had to throw up,” said Arun Kejriwal of Kejriwal Research and Investment Services, referring to futures due on Thursday.

Though sellers savaged almost all stocks, it was public-sector companies that were directly in their line of fire. The NDA and the Congress-led alliance have economic policies mirroring each other, but operators fear a fractured mandate would stall reforms, especially divestment. “The foreign investors came in droves to invest in the markets, enthused by the reforms unleashed by the NDA government. They may exit if the process is halted,” a dealer said.

Such was the bloodbath that only three — Cipla, HDFC Bank and Ranbaxy — of the 30 sensex shares came out unscathed. The volume of business on BSE dropped to Rs 2,389.05 crore from Rs 2,638.02 crore on Friday. The BSE-500 index tumbled 103.70 points to 2342.32 from its previous close of 2446.02; the BSE PSU index fell 215.51 points or 4.98 per cent to 4115.73 from 4331.24.

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