The Telegraph
Since 1st March, 1999
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Rate roller bulldozes sensex
Bank stocks lead the losing pack

Mumbai, Dec. 11: The stock markets melted in the heat of a broad-based selloff, registering the single largest loss since June 13 with the sensex — the bellwether index — slumping 400 points to settle at 13399.43. The panic selling was precipitated by Friday’s surprise 0.5 per cent hike in the cash reserve ratio (CRR) by the Reserve Bank of India.

The sensex had settled 414 points lower on June 13 at 9062.65 points. The last major fall in the sensex occurred on September 11 when it shed 368 points at 11550.69.

The 30-share index crashed to touch the day’s low of 13261.73 and swung by 540.25 points during the trading session, the highest since June 14.

The Nifty tumbled by 112.50 points, or 2.84 per cent, to 3849.50 from the previous close of 3962.00.

Buying opportunity

However, market watchers were unfazed by the meltdown. “Every such correction should be viewed as a buying opportunity in a buoyant market,” said Manish Sonthalia, vice-president (equity strategies), Motilal Oswal Securities.

“Today’s correction appears a healthy part of an uptrend and does not signify the beginning of any downturn,” said Gautam Shah, analyst with JM Morgan Stanley.

Bank index

The domestic markets ignored the firm global markets and reacted to RBI’s move with banking stocks leading the fall, triggering a panic in the broader market, said Sonthalia. The bankex alone collapsed by a record 463.96 points, or 6.43 per cent, to end at 6749.78 from the last close of 7213.74. Among major banking stocks, ICICI Bank ended 6.5 per cent lower and state-owned State Bank of India shed 8.2 per cent.

Fall season

With today’s fall, the sensex has shed 572.60 points or four per cent in the past two trading sessions, from a record closing high of 13972.03 on December 7. The sensex had risen 10.6 per cent in a short while to its lifetime closing high from 12623.28 on October 23.

“There was both an emotional and forced side to the meltdown. While the emotional factors led to panic selling, the forced ones were due to compulsory unwinding of margin positions,” said Shah.

“However, we do not expect much downside from the current levels, as the sensex has already corrected by 700 to 800 points. While one can expect a further correction of about 200 points, buying support should emerge at those levels,” said Sonthalia.

Worst is over

“The sensex and Nifty had very strong medium term support levels at 13200 and 3800 respectively and both the indices are hovering near them. Thus, further correction seems unlikely,” said Shah.

“While there was some panic unwinding of positions, most of the pain seems to be behind us. The markets should consolidate at these levels and then undertake a gradual damage recovery provided the external factors remain favourable,” he added.


Infosys Technologies will join Nasdaq 100 index today, making it the only Indian firm to figure in the prestigious club. “It will make us a global brand improving our profile,” Infosys CEO and managing director Nandan Nilekani said.

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