The Hindu Business Line : Sensex crashes on panic selling

A LATE rush by panic-stricken retail investors and punters to cover morning long positions hastened a collapse of an uncertain BSE Sensex shaving off more than 2 per cent of its value by close.

The 30-share benchmark of the BSE opened high and rapidly climbed to 6130 only to crash more than 230 points before gaining back some ground to close at 5922.11, a loss of 2.34 per cent or about 142 points.

The broader S&P CNX Nifty lost 2.18 per cent from its previous close of 1935.35 to close at 1893.25.

The roller-coaster ride over the past couple of days seemed to have trapped retail investors on Tuesday.

"A sharp rally yesterday after steep falls the previous two days had given investors the hope that the market had turned.

Several retail investors held on to their positions through the day thinking stocks would rebound.

All of them hurried to sell in late trade, triggering the collapse, said a dealer.

Institutional investors, meanwhile, appeared to have been watching from the ropes. A fund manager with a top mutual fund said they had asked distributors to go easy on equity schemes.

At these levels, they believe valuations may be a tad stretched and are finding it difficult to manage new flows into funds.

Foreign institutional investors also seem to be holding back the reins.

"They say that they would be comfortable only if the indices correct a bit more.

Current levels do not look attractive to enter," said and institutional dealer.

The FII flows have slowed down and investors have been net sellers for a few days.

Yesterday, however, they were net buyers of Rs 27 crore in Indian equities.

One particular portfolio investor, considered very bullish on GAIL (India), is said to have sold the stock substantially today.

The institutional dealer said FIIs might dump some of the stock they accumulated if they felt they had overestimated their worth.

Apart from the high stock valuations, early corporate results have been a mixed bag raising doubts whether investors were over-expectant.

For example, Tata Power's performance disappointed sector analysts while Bharti exceeded market expectations.

Bharti's showing created a rush for Reliance shares in the morning but later triggered a sell-off at the counter.

Similarly, Tata Power ended up as the biggest loser on the Sensex on worse-than-expected results.

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