Who'S The Mysterious Spoilsport?

Who rocked the market yesterday - foreign funds or operators? That is what the players are trying to figure out. While most players were expecting negative FII inflow (both exchanges combined) to the tune of nearly Rs 150 crore, the net negative figures of Rs 32 crore at the end of the day has taken everybody by surprise.

The easiest thing would have been to lay the blame at the doorsteps of operators. However, long positions on the BSE have reduced by a mere Rs 34 crore yesterday. So finally who caused the 110 point slump?

Sudden death

The sudden blast of selling pressure within the first few minutes of commencement of trading triggered off a wave of panic among players.

A sharp fall was witnessed at counters like SBI, Pentafour, Satyam, MTNL, L&T and Zee Telefilms in such a short span of time that caught everybody unawares. Another interesting aspect of the fall was that all these scrips crashed at the same time. Savvy market players are not ruling out the possibility of programmed trading whereby the sell order is automatically triggered off when the scrips move up to a pre-determined price. The advantage of programmed trading is that the fund manages get the best possible price for its sales.

For example, if a fund wants to sell one lakh shares of Zee, one lakh shares of Satyam Computer and one lakh shares of Pentafour Software. In case the orders are executed manually one by one, by the time half the quantity of Zee is sold, market sentiment gets affected. This, in turn, exerts pressure on the prices of Satyam and Pentafour. As a result, the fund realises less than what it would have actually got had all the three scrips been sold simultaneously.

Flashback

A European brokerage, which specialises in trading in promissory notes, is reported to have picked up around six lakh shares of MTNL on behalf of its foreign clients on Wednesday. All the gains made by the stock was negated yesterday, thanks to a massive sell order at the counter by a leading UK-based fund.

The ICICI scrip continues to be relentlessly hammered by foreign funds. On Wednesday, a Hong Kong-based brokerage is believed to have dumped around seven lakh shares.

Odd men out

Certain scrips just seem to be plain indifferent to the on-going turbulence at the bourses. For example, trading in the Vikas WSP was frozen yesterday after there were only buyers at the counter.

Despite selling pressure from institutions, the IPCL scrip continues to hold on to Rs 53 levels ever since it came out of the no-delivery period. Novartis continues to touch new 52-week highs every other day on sustained buying interest.

Rejig trades

Two leading US-based funds (which are known to be committed to India) seem to be in the process of carrying out a major portfolio restructuring. These two funds have taken a negative view on steel, cement and especially the petrochemicals sector. This could be evident from the manner in which these funds have been dumping BPCL and HPCL stocks. On the contrary, these funds are getting into stocks in the growth sector. It is learnt that one of these fund is looking to pick up close to one million shares of Dr Reddys Labs. Of these, close to three lakh share were picked up yesterday.

Also, another foreign fund is believed to have pumped in close to $25 million into the Indian markets during the past three days. This investment is reported to have been made through programmed buying in the index.

The Zee counter seems to have attracted the attention of a domestic fund which has picked up close to 70,000 shares. A London-based fund, which accumulated the stock at extremely low levels, is supposed to be the seller.