Sensex Plummets 98.4 Points
The chief barometer, the Bombay Stock Exchange (BSE) sensitive index crashed 98.41 points yesterday to close at just above 3,000, at 3002.86 against a previous close of 3101.27.
During intra-day trading, the sensex, however, fell below the psychological 3,000-mark to record the day's low of 2939.87. The previous time when the sensex fell to similar levels was on January 10, 1996 at 2997.33. The NSE 50 declined sharply losing 30.12 points, closing at 874 over the previous close of 904.12.
A halt in the selling spree came towards the end of the closing market sessions, with buying support from the LIC being witnessed. Most of the pivotals during this period rose marginally.
The selling pressure was so strong that the BSE, in a precautionary move yesterday, decided to tighten the circuit filter on the `A' group stocks from 10 per cent to 5 per cent with effect from today (October 8).
This will be in force till the end of the current settlement ending October 11, when the situation will be reviewed again.
Growing political uncertainty was the main factor which pulled down sentiments, with reports of the possible arrest of former Prime Minister P V Narasimha Rao dampening sentiments. Signals sent out by Congress president Sitaram Kesri over withdrawal of support for the UF government further weakened the markets.
The slide was across the board in almost all favourite FII stocks. The markets had opened steady but there was panic selling after some FIIs turned sellers in the morning session itself.
The State Bank of India (SBI) stock continued to witness selling pressure, with trading volumes of Rs 183.15 crore on the BSE. It opened at Rs 230, slid to a low of Rs 211.75 and finally closed at Rs 217.25. The scrip lost Rs 11.25 at the end of the session.
At the NSE, the stock touched its seven per cent circuit-filter level at Rs 214 and closed at Rs 217 levels.
According to sources from UK-based investment banking firm Klienwort Benson, a fresh re-look at the markets could come about next week. "The market could bottom out at current levels though," a source said.
According to Alok Sethi, Natwest Markets director, a global investment bank, "The next few months the market will remain weak due to sentiments weakening on the possible slowdown of economy and corporate half-yearly results. The delay in key policy related decisions in the post-budget period also affected sentiments."
Says S V Prasad of J M Mutual, "The current state of the markets is clearly because of lack of depth, with the large domestic players conspicuous by their absence. The need of the hour is for creation of institutions. while this cannot be done overnight, the focus needs to be on this issue."
Amongst the domestic financial institutions, UTI did not provide support to prop up the markets. Said a senior UTI official, "There is now a clear need for the policy-makers to take the issue seriously and come out with sops for the small investor. Among the urgent steps needed are a review the MAT structure as also bring back the 80 M benefit which was withdrawn earlier"
According to Ajit Ambani, BSE broker, the market is facing the brunt of the all round recession in the market. He told Business Standard: "The market is suffering because of lack of liquidity in the system. The interest rates are very high despite drop in demand for funds."
Amit Ghose, corporate finance head of HSBC James Capel, said a recovery may not be expected until the next budget. There is no confidence and the government should come out with an aggressive budget the next time, he said.