Financial Daily from THE HINDU group of publications
Saturday, Jan 12, 2002
Markets - Stock Markets
Markets hit by war fears; Sensex sinks, recovers
MUMBAI, Jan. 11
THE stock, currency and bond markets turned jittery on Friday following reports of a statement by the Army Chief that a `limited conventional war-like' situation had emerged.
However, old economy stocks on bourses remained stronger. Bond prices also fell by 30-40 paise over morning levels in reaction to the announcement by the Army Chief, Gen S. Padmanabhan.
He told a news conference in New Delhi that the situation at the border with large military build-up was "serious", adding that the Army was fully prepared to meet any threat from the neighbouring country.
"The movement of the Indian Army this time is not an exercise. What I am doing now is for real. I have to be ready for war. The situation can comfortably be described as serious,'' he said.
Sudden selling was witnessed across the board, which resulted in the 30-share benchmark index of the Bombay Stock Exchange (BSE), Sensex, falling by over 100 points from the day's high.
However, some short covering and select buying in the old economy by institutions led to some recovery in the last half-hour of trading.
The Sensex recovered to close at 3,363, down by 19 points. The S&P CNX Nifty touched a high of 1,105.96 points and dipped to the low of 1,073.45 points, before closing at 1,088.55 points, showing a decline of 9.65 points from the previous close of 1,098.20 points.
Technology stocks were the worst hit on the day, with market heavyweight Infosys Technologies plunging by seven per cent while Wipro fell by 2.32 per cent on the BSE.
Other frontline and second-rung software stocks also fell, and the BSE IT index dropped by 78.91 points (4.73 per cent) to close at 1,589.27.
"Technology stocks had risen in the last two weeks and the fall is good for the market,'' a dealer said. He added that the fall was more technical in nature and investors should take the opportunity to buy in.
Buying in old economy stocks, especially FMCG, auto and cement, brought back the bourses into recovery mode.
Top gainers included Telco, Hero Honda, ITC, Bajaj Auto and Ranbaxy Lab while top five losers were Infosys, Satyam Computers, NIIT, HCL-Insys and Tisco.
The traded volume at the NSE was at 16.65 crore shares, while the total traded value stood at Rs 3,513.54 crore.
Dealers said that the next week was likely to remain volatile in the wake of tension between India and Pakistan. In addition, the quarterly results by companies would also be the key drivers of the market.
Meanwhile, sharply lower yields have put State-owned banks off the bond market, especially after the Reserve Bank of India (RBI) asked them to transfer gains from the sale of Government bonds to an Investment Fluctuation Reserve Account.
"The selling may not have been heavy because of the RBI statement, but it did turn sentiment weak," an official with a State-owned bank said. Dealers expect bond prices to remain at these lower levels Saturday, with little investment buying in sight.
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