The Telegraph
Since 1st March, 1999
Email This Page
Dance of doom on Dalal Street
Steepest single-day plunge in nifty

Mumbai, May 14: Barely a day after it shrugged off fears of instability, markets lost their nerve and Bombay Stock Exchange (BSE) sensex, a gut-wrenching 330 points, as reforms appeared to be running into a minefield of policy haggles and political posturing.

The slide swallowed Rs 1,02,109 crore of stock wealth, the highest single-day loss in share value. Skittish investors scampered out of shares after shrill Left rhetoric suggested the road ahead for divestment and foreign investment would be fraught with speed-breakers.

An imminent Congress government needs the support of the resurgent Communists, whose opposition to sale of state-owned firms, subsidy cuts and labour law changes are only too well known to investors.

The BSE sensex settled at 5069.87 points, down 6 per cent in a plunge dubbed as the fourth-largest in its history. After opening at 5409.34, it hit the day’s high of 5416.04 and a low of 5043.99. The swing of 372.05 points is its fifth-largest; it gyrated 393.17 points on May 2, 2000.

“We are not used to this. We have been used to NDA ministers making statements that ruffle markets, but not to this extent,” said Kejriwal Research and Investment Services’ Arun Kejriwal, making no bones about his distaste for party protagonists who spook markets without even being elected as a policy-shaping MP.

Such was the intensity of the selling that the National Stock Exchange’s nifty nose-dived a record 135.10 points to 1582.40. It had fallen 106 points on April 4, 2000. The exchange had to halt trading for some time to make sure there were no problems in margin-money payments.

PSUs savaged

Public-sector majors like ONGC and State Bank led the slump, some of them walloped 15 per cent. These shares sent the sensex through a shredder.

The markets have been in a bear grip ever since exit and opinion polls predicted problems for the Atal Bihari Vajpyee-led NDA in racking up a majority. That fear turned into a scare at the prospect of a Left-backed Congress combine seizing the reins at Raisina Hill.

Sitaram Yechury, a leading CPI(M) politburo member, set the cat among pigeons this morning by asking for the divestment ministry to be wound up and for the profit-making PSUs to be kept off the block. This sparked concern that the new government will go slow on reforms. The big question that hangs in the Delhi air now is who will take the key economic ministries.

The BSE-PSU index crashed 542.84 points, or 14.41 per cent, to 3223.32 from its last close of 3766.16. The BSE Bankex slid 312.68 points or 10.59 per cent to 2639.98 from 2952.66. The BSE-100 index shed 199 points to 2683.46 from 2882.46.

ONGC surrendered 12.5 per cent at Rs 722.55 and State Bank slipped 15 per cent at Rs 514.85. The former crashed below its offer price of Rs 750 per share, the cut-off level for institutions and large companies last month.

However, it closed slightly above the offer price of Rs 712.50 for retail investors. Gail, too, ended below its issue price of Rs 185. The market capitalisation of PSU companies shrunk by Rs 56,761 crore during the session.

FIIs walk away

Indian stock markets, Asia’s best performers after Thailand, have reversed course after more than a year. Behind this about-turn lies the selling wave of FIIs. This month alone, foreign investors sold Rs 2214.7 crore worth of shares, a clear indication of the changing perception. “FIIs have been selling not only because of recent political events, but doing so across Asia,” said Jamshed Desai, head of research at ILFS Investsmart.

Email This Page