Sensex dips 530 pts on FII selling

Heavy selling by hedge funds and foreign institutional investors (FIIs) on Friday pulled down the Sensex as well as the broader index Nifty, which closed at their two-year lows. Funds and FIIs offloaded heavily as they were facing huge redemption pressure.

While the Sensex fell by 4.09 per cent (or 530 points) to end the day at 12,526, the Nifty declined by 3.35 per cent (or 132 points) to close at 3,818.

The stock of Reliance Industries, having the highest weightage, on Friday fell to its lowest in the past 18 months. The stock was down 7.67 per cent at Rs 1,760.

As per provisional figures, FIIs were net sellers to the tune of Rs 1,662 crore in the cash segment, while domestic institutions made purchases of only Rs 56 crore.

Investors parking their money in hedge funds have to intimate the fund managers at least 90 days prior to their withdrawal. The final date for withdrawing money this year was September 30. According to market players, most of the fund managers are facing a huge redemption pressure and hence they are offloading their portfolios.

Amitabh Chakrabhorty, President of Religare Securities, said, “Frontline stocks were battered the most on Friday. This suggests that even some of the long-only funds have started withdrawing their money. It’s fire selling in equities the world over as most of the top funds are facing redemption pressure.”

Market sources informed that there were hedge funds, which would have to wind up operations. Chakrabhorty further said that even domestic banks have been pulling out money from liquid schemes of domestic Mfs as intra-bank lending rates in the call money market too have gone up.

Among others, Tata Steel was the top loser with a decline of 10.22 per cent at Rs 393, while ICICI Bank dipped 8.51 per cent at Rs 504. Ranbaxy Laboratories was the only stock that advanced during the day as the central government approved its deal with Japanese drug-maker Daichii Sankyo. The stock was up 4.83 per cent to Rs 263.

The BSE Metal index was the top loser, down 7 per cent, among the sectoral indices. The global benchmark for base and precious metals, the London Metal Exchange (LME), fell as the benchmark dollar index in New York rose to touch a high of 2008. Also, other commodity prices, including crude, cracked in the global markets.

Re falls to 47

The rupee fell to a five-year low of 47 per dollar on Friday as sharp losses in the share market fuelled concerns of further capital outflows while strong dollar demand from oil firms weighed. The partially convertible rupee ended at 47.0750/0850 per dollar for the first time since June 2003.