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FIIs prick sensex pride

Mumbai, April 12: Stocks swooned and punters groaned after a bloodbath on Dalal Street today that was triggered by panic selling by foreign institutional investors.

The bellwether index ' the sensex ' plunged by almost 307 points (or 2.6 per cent) to close at 11355.73 which lopped off Rs 35,715 crore worth of investor wealth.

It was the worst fall since March 17, 2004 when the sensex had plunged 563 points after the UPA government stormed to power.

The market had been anticipating a correction after one of the most astonishing bull runs in recent times ' but today’s mayhem left everyone aghast over its ferocity.

All the 30 stocks in the sensex tumbled as foreign investors dumped stocks and tried to take their profits off the table. The FIIs have been the central force behind the recent bull run and their sudden withdrawal set the market aflutter.

The foreign investors had been uneasy about the bull run and had shown clear signs in the past two trading sessions that they would withdraw. They had sold more than Rs 420 crore on both days.

Just how much they sold on Wednesday will be known tomorrow when the market regulator releases the figures. Estimates indicate that the FIIs have sold more than Rs 800 crore in shares.

“For two consecutive days, the FIIs have been net sellers. When investors saw that they were selling even today, they panicked,” said Run Kejriwal from KRIS. Kejriwal added that at its current levels, the indices needed a net infusion of around Rs 800 crore a day to bring them back from the brink.

The big question on everyone’s mind now is whether today’s crash is only a blip or the beginning of a massive correction. The pundits did not have the answers to the question but said they expected the markets to remain volatile. “We will have to live by the day,” Kejriwal said.

Brokers here observe that a key factor that could add to choppiness is the forthcoming quarterly results from the technology titans. “We are now in the midst of the results season and this means that the vulnerability of the market further increases,” added an analyst.

Even in today’s trading, results did have a part to play. Disappointed over the quarterly numbers of I-Gate Global Solutions and Emphasis BFL, many investors were selling infotech shares on fears that the financial performance of majors like Infosys Technologies and Satyam may fall behind the Street’s estimates.

Software shares were the hardest hit and a glimpse of their slide was evident from the BSE IT Index which plummeted nearly 151 points or 3.66 per cent today.

The BSE IT index witnessed the largest fall among various sectoral indices. TCS, the largest IT company saw a slide of 6 per cent, the largest fall since it listed on the bourses.

Rupee stutters

This slide in the equity markets had its impact on the forex markets as well. As the FII selling is expected to make availability of dollars short, the rupee today tumbled against the US dollar.

The rupee ended at more than three month low of 45.20 per dollar. Like the stock markets, the rupee too began with fresh gains at 44.79 per dollar.

Experts reckon that investors will wait and watch till Infosys announces its results on Friday.

In today’s trading, all the sectoral indices ended with a fall between 2.5 and 3.75 per cent.

Apart from the selling pressure induced by FIIs, brokers said that the move by BSE and NSE to raise margins on share transactions by about 250 basis points from April 17 added to the momentum.

The 30-share BSE Sensex after opening at 11693.15, up marginally from the last close of 11662.55, could only rise to an intra-day high of 11,702.77. A huge sell-off that followed saw the index hitting a low of 11302.78 after which it closed at 11353.73, a loss of 306.82 points.

On the NSE, the Nifty was also bleeding. It lost 98.45 points, nearly 3 per cent, to close at 3380, after touching the day’s low of3366.75.

Rupee stutters

This slide in the equity markets had its impact on the forex markets as well. As the FII selling is expected to make availability of dollars short, the rupee today tumbled against the US dollar.

The Indian currency ended at more than three month low of 45.20 per dollar. Like the stock markets, the rupee too began with fresh gains at 44.79 per dollar.

Later, the currency plunged to a low of 45.2600/2700 per dollar on heavy dollar demand and closed at Rs 45.19/20 per dollar, steeply lower than the previous close of Rs 44.8350/8450.

Some analysts said today’s fall in rupee by around 0.78 per cent was the biggest one-day fall in the current calendar year.

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