The Telegraph
Since 1st March, 1999
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Market shakes with Friday fright
Sensex crashes 223 points

Mumbai, May 28: The stock market today gave a thumbs down to the common minimum programme. A day after it was announced, the sensex crashed by 223 points, wiping out over Rs 51,000 crore of investors’ wealth.

The BSE benchmark 30-share index opened sharply lower at 5026.92 and later plunged to an intra-day low of 4821.59 before closing at 4835.39 — its lowest since the market’s 11 per cent crash on May 17.

Disillusioned with the CMP that put divestment, labour reforms and privatisation of power utilities on the backburner, foreign institutional investors (FIIs) sold heavily across the spectrum, brokers said. Power, PSU and banking sectors bore the brunt of heavy selling.

“Investors have taken a very pessimistic view,” said Navin Roy, dealer at Taib Securities, a well-known FII brokerage.

“The sensex closed very weak today, which means there is more to come,” he added. “Investors perceive the CMP to be long on promises and short on delivery,” Roy added.

“We fear that the CMP will slow down the reforms process. The cascading effect will be enormous,” brokers said.

Dealers like Roy hope the sensex will stabilise around 4500, plus or minus 200 points, when trading resumes on Monday.

“Although the government has not closed the door on public sector selloff, it has scrapped the disinvestment ministry, indicating that a majority stake and management control will remain with the government. This will automatically discourage foreign investments,” brokers said.

The Congress-led government has almost reversed the policy of the previous government by scrapping the disinvestment ministry, they added.

PSU scrips like MTNL shed 7.34 per cent and closed at Rs 111.70. ONGC fell 6.69 per cent to Rs 649.55 and HPCL was down 3.03 per cent to Rs 313.50.

Operators and retailers reacted negatively to the lack of clarity in the CMP on how the government will mobilise resources and sold heavily in blue chip counters.

The broader NSE nifty index also lost 77.65 points, or 4.89 per cent, to close at 1,508.75.

Brokers attribute the sharp downturn in power stocks to the government’s decision to review the Electricity Act. Reliance Energy was down 7.5 per cent to Rs 497.75, Tata Power was down 7.24 per cent to Rs 274.90.

Bank stocks fell on speculations of a rise in interest rates.

Key counters like Reliance, State Bank, Grasim, Hindustan Lever, Tata Motors, Tata Power, ICICI Bank, Bhel, Tisco, Wipro, Maruti, Infosys, Satyam Computer, ITC, Bharti and Bajaj Auto suffered a sharp setback.

The broad-based BSE-100 index tumbled by 122.63 points to 2568.40 from the previous close of 2691.03. Even good fourth quarter results could not stem the slide for SAIL. The share lost 6.41 per cent to Rs 29.20.

The volume of business rose to Rs 2,324.15 crore from Rs 1,590.24 crore on Thursday. SBI was the top-traded share with the highest turnover of Rs 264.55 crore followed by Reliance (Rs 228.89 crore), Maruti (Rs 168.07 crore), Satyam (Rs 161.25 crore) and Tisco (Rs 127.18 crore).

In the specified group, 186 scrips, including 28 index-based counters, registered sharp to moderate losses while 11 others finished with gains.

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