Another 200pt Correction Seen

Failure of the government on the Insurance Regulatory Authority (IRA) Bill, lack of aggressive buying support by FIIs, stock-specific selling by domestic institutions and squaring up of overbought positions by speculators resulted in sentiment remaining damp on the bourses yesterday. Leading brokers expect a correction of 150-200 points in the market.

The Reliance scrip was firm yesterday even as most other scrips in the specified group came under selling pressure. The scrip witnessed trading volumes of over a crore on the BSE and the NSE. On the BSE, 1.07 crore shares worth Rs 400.52 core changed hands while on the NSE, the corresponding figures were 1.73 crore and Rs 647.57 crore respectively. Marketmen said that in addition to some FII purchases, there was a lot of speculative purchases at the counter.

According to broking circles, the shares are being accumulated in anticipation of positive quarterly results from the company.

There were rumours in the market that minister of state for petroleum, T R Baalu would be resigning shortly.

Key refinery stocks, HPCL and BPCL, were among the major losers of the day. According to marketmen, UTI was a seller at these counters.

"There is a general slowdown in FII buying, and domestic institutions are selling. Stocks like ITC and Reliance were bought while MTNL stock was sold by some FIIs. There was a mixed sentiment with confusion prevailing on the political front after the IRA Bill was shot down," Ketan Jhaveri, head of dealing, Kotak Securities, said.

The market also witnessed speculators squaring up their overbought position in stocks like Tisco. Domestic institutions sold stocks of ACC and Castrol.

Says S Gopalakrishnan, vice president, UTI Securities, "the activity in the market over the past couple of trading sessions has been dominated by speculators rather than FIIs or domestic institutions. Following the fresh developments on the political front, speculators have started abandoning their positions. Most of the scrips which fell yesterday were those in which there has been a lot of front running."

Brokers said that a correction of 150-200 points was on the anvil. "We expect a further fall by 150-200 points. The market will witness an upswing only after reaching 4250-4300 levels where many foreign funds and FIIs are expected to make an entry," a dealer at a leading FII brokerage said.

Among the major losers yesterday were Sterlite Industries at Rs 250 (- Rs 1.25), Telco at Rs 378.50 (- Rs 18), Parke Davis at Rs 231.25 (- Rs 9.75) and MTNL at Rs 287.75 (- Rs 16.25).

Fund managers feel that the setback on the insurance bill will affect market sentiments. Foreign funds are keenly watching the situation, they said.