The Telegraph
Since 1st March, 1999
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Markets mauled in Friday frenzy

Mumbai, April 15: On a muggy Mumbai afternoon, a swarm of skittish sellers turned stock markets into a slaughter house, shredding investor confidence and leaving the sensex bleeding like it was on May 28 last year.

The index was tottering below the key 6250-mark, at 6248.34 points, as it plunged 220 points. Shareholder wealth on Dalal Street ' market capitalisation as it is called ' shrivelled by Rs 50,000 crore at Rs 16,62,779 crore.

A confluence of factors whipped up the selling frenzy, the most apparent of which was Infosys Technologies' forecast for the first three months of this financial year.

'Markets do get into a funk occasionally. It's more of a crisis of conviction rather than a serious problem,' said Ramesh Damani, a prominent broker on Dalal Street.

Infosys's conservatism about its immediate future was stoked by the now-familiar spectre of hardening US rates and jitters over weakness in global metal prices.

'There was all-round selling in the market,' rued Ajit Sanghvi of MSS Securities, a leading institutional brokerage. He felt rising US rates had prompted foreign investors to wait before pumping in fresh money, the shortage of which could have hastened the slide.

Amid the dire collapse, however, was a band of optimists like J P Morgan, CLSA and Kotak Securities. The three firms reaffirmed their faith in Infosys, despite the whiplash it suffered at the hands of guidance-spooked investors. They saw the stock at Rs 2400-2500 next year, even though it fell a 7.5 per cent to Rs 1945 today.

The start of trading said it all: the BSE sensex opened 128.19 lower at 6339.75. Later, it plumbed an intra-day low of 6232.37 before winding down to 6248.34 at close.

Some took consolation in the fact that the slide was part of a global downtrend in which Tokyo's Nikkei shed 192 points, Hong Kong's Hang Seng 133 points and the London FTSE 34.60 points. Early trading in US offered little hope of a dramatic change in market direction.

More interesting was the trend in the futures market, where indices are quoting at a discount to the spot segment. This is a signal that spot rates were overvalued.

Operators also had to contend with the metal misery as prices on the London Metal Stock Exchange hovered near recent lows.

Among sectoral indices, the BSE-IT index surrendered 160.20 points at 2434.47, the bankex 115.77 points at 3771.08 and the BSE-metal index 291.35 points at 5947.98. In the specified group of the BSE, 175 shares, including 29 from the sensex, declined. Only 20 were gainers.

Rupee dips

The rupee declined to 43.83 against the dollar, felled by surging demand for greenbacks from banks and by weakness in the international equity market.

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