The Telegraph
Since 1st March, 1999
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Bank scrips clobbered after share probe call

Mumbai, June 10: The recent winning streak on bourses snapped today with the Bombay Stock Exchange (BSE) sensex ending with a 47.76-point loss over its last close.

Cutting short the rally in share prices was the air of suspense that hung over Dalal Street after the finance minister sought a report on the trading pattern in bank shares. Jaswant Singh said at a function here late on Monday night that G. . Bajpai, the chairman of Securities and Exchange Board of India (Sebi), has been asked to compile a dossier on recent bank share gyrations. He had expressed his “disappointment” with the way the stocks had moved over the past few weeks.

Surprisingly, the markets expected a slide this morning, but it did not happen as soon as business resumed. The selloff occurred much later, after it became clear that Sebi would indeed investigate the volatile movement in bank shares — until recently one of the best performers on bourses. A look at today’s pattern and the contrast could not have been starker: of the 36 bank stocks traded on exchanges, 31 took a beating.

Accentuating the slide was a rush of profit booking, a scramble where financial institutions like Life Insurance Corporation and Unit Trust of India led the pack. They dumped stocks that were big gainers in the last few weeks. “They were all out to book profits today,” a dealer affiliated to a prominent BSE brokerage said.

According to many market watchers, part of today’s losses was the result of a belief among institutions that “a bird in hand is worth two in the bush”. So, yesterday’s favourites turned today’s pariahs.

The breadth of the decline could be gauged from the fact that 25 of the 30 stocks that make up the sensex ended losers. Nothing seemed to prevent index heavyweights like Reliance, Infosys, ITC, SBI, HDFC, HPCL, L&T, MTNL, ICICI Bank, Ranbaxy, Telco and Tisco from taking a pounding. Not even, the first flush of the monsoon, which soaked Mumbai in recovery hopes.

Bank shares were not alone in their ordeal; giving them company were software stars like Infosys and Satyam.

BSES, Tata Power, ABB, Siemens and Alstom Power, all in the business of electricity, were among the few stocks to have come out unscathed from the clobbering.

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