Sensex sheds 148 points

Markets get into correction mode.

Shares tumbled nearly 2 per cent on Monday after running up more than a quarter since early May as investors worried about high share valuations and the threat of higher oil prices to corporate earnings. Leading market players called Monday's fall as a "correction long overdue".

Dropping 148 points, Sensex closed at 7,606.17, the second biggest fall after April 15 this year when the index lost 219 points. Nifty lost 36.80 points to shut shop at 2324.40 points. The market breadth was also negative, with 1,453 losers and 953 gainers.

There were various triggers for the decline of the market on Monday. While Indian ADR and GDRs lost ground on Friday, rising crude oil prices, and the interest rate hike by the US Federal Reserve expected tomorrow were making market players nervous, brokers said.

Besides, the Bombay Stock Exchange's decision to up margins to 100 per cent on T, TS and Z group stocks also added to the fears. Former BSE President Deena Mehta said, "'It was a small correction long overdue." Referring to the slapping of special margins on a part of the market, she said, "I am happy as it is a good risk containment measure."

Surprisingly, the fall was higher in the frontline and mid-cap stocks compared with smaller stocks. The comparative figures of market-capitalisation of various groups on the BSE brings this out. The market cap of A, B and B1 groups fell by 1.55 per cent, 0.84 per cent and 1.22 per cent, respectively compared with their closings on Friday.

The two groups -- T and TS - have a comparatively marginal loss of 0.52 per cent and 0.30 per cent, respectively. On the other hand, S and Z groups posted a rise of 0.19 per cent and 0.37 per cent, respectively, telling a different tale.

A bloodbath was witnessed in banking, information technology stocks showed moderate weakness and sugar stocks defied the market trend. Many other sectors had mixed fortunes.

The stocks among the BSE index shares to have ended higher were of the National Thermal Power Corporation and the Oil and Natural Gas Corporation.

Among other stocks that moved substantially were Torrent Pharmaceuticals, which rose 3.7 per cent to Rs 562. Reliance Industries slid nearly 2 per cent to Rs 711.50 after having climbed more than 32 per cent since the middle of June.

Reliance Energy shed 2.8 per cent to Rs 629.25 and Reliance Capital hit an all-time high of Rs 490 before closing 1.2 per cent lower at 470.15.

The top three scrips by volume were Himachal Futuristic Communications, which rose 14.8 per cent on trade of 28.6 million shares, Steel Authority of India, which went up 2.2 per cent on a volume of 11.2 million shares and Hindustan Motors (5.9 per cent) on trade of 7.6 million shares.

Some punters, wary of the one-way spiral of the Sensex for nine days till last Thursday, felt relieved because of the correction. The Sensex did not even look back when the commercial capital of Mumbai was flooded, ravaging the lives of millions of people and threatening the profitability of select Mumbai-based companies. Still, the market feels that this is not the end of the corrective phase and that the market can continue to skid for a few more sessions.

VVLN Sastry of Firstcall India Equity Advisors, however, said that one could not say that the market had run out of steam and that this was a trend reversal altogether.

"There is a good amount of buying still being seen. A small trigger may bring the market back to its posture again. Liquidity is still too high and needs to find its investment destination in equities," he said.

Sharmila Joshi of Asit C Mehta Investment Intermediates said, "The market was also tired of the rise in the benchmark without any respite over the last few days. This provides the much-needed break from the spiral," she added.

There is no bubble: FM

Finance minister P Chidambaram on Monday said there was no bubble building in the stock markets. The minister was reacting to CPI's Gurudas Dasgupta's charges in Parliament that the government was sleeping when the Sensex had turned "senseless".

"It (Indian stock market) is one of the best regulated markets in the world," Chidambaram said.