The Telegraph
Since 1st March, 1999
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Monday misery mellows market

Mumbai, Dec. 26: Jittery investors clobbered stocks on Boxing Day and sent the bellwether sensex reeling by 171 points to 9085.80 at the close of a skittish day of trading that gouged out values across the board.

The selling spree began when investors scrambled to square up positions ahead of Thursday when the last derivatives contract of 2005 expires.

With no fresh triggers in sight amid ongoing year-end holidays, the key benchmark index went into a tailspin as heavyweights, led by Reliance Industries, and scores of other scrips saw investors dump shares.

The 30-share BSE sensex witnessed extreme volatility as it crashed 212 points during intra-day trade. Though the key index recovered from these levels, the bourse looked badly beaten and bruised.

The sensitive index dipped to an intra-day low of 9050.01 after opening at 9254.09 and touching an high of 9262.48. It later closed at 9085.89, a fall of 171.02 points, its biggest since October 27.

Market pundits are predicting more choppiness and losses in the days to come. They reckon that the benchmark index will tumble by another 200 to 300 points over the next couple of sessions.

Broking circles said the decline was led by RIL. The petrochemicals behemoth has announced January 25 as the record date for its demerger. While shareholders of the company will get shares of four entities, there are concerns of a price adjustment in that stock as four resulting companies will be formed out of RIL.

“There are fears that the scrip may quote lower by around Rs 200 from its current levels from January 18 when the price adjustment takes place,” a broker remarked. He added that this fear also affected the futures market. This was reflected in the Nifty Futures for December delivery, which fell by 54.10 points at 2737.10. Apart from worries on the RIL front, marketmen also attributed the sell-off partly to Christmas holidays and approaching year-end. Moreover, the government’s decision to not sell its stake in SAIL also acted as a big dampener.

“The markets have risen to record levels. Therefore, a correction was in order and it happened,” remarked an analyst with a foreign brokerage.

While the RIL scrip ended lower by Rs 10.10 to Rs 832.30, there were many others that gave it company. All the BSE indices finished in the red. The BSE Bankex was the biggest loser, dropping 161.29 points to 4899.86.

Similarly, the BSE Metal index lost 108.64 points at 6239.91, the PSU index by 98.17 points, followed by the Auto Index among others. Interestingly, the massive fall came despite positive numbers from foreign institutional investors.

Data released by Sebi showed that they made net purchases worth $52.80 million on Friday. The foreign investors have been the major force in pushing the key indices to record levels and they have so far pumped over $10 billion into domestic equities.

This has led to the key index rising 40 per cent this year. Analysts expect their presence to diminish over the next few days, though it is widely believed that these investors will come back next year. V.K. Sharma, research head at Anagram Stock Broking, expect investors to continue to book profits over the next couple of sessions.

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