Financial Daily from THE HINDU group of publications
Thursday, Jan 22, 2004
Markets - Stock Markets
Sensex plunges 164 in bearish market
Mumbai , Jan. 21
THE bulls seem to have started deserting the bourses as stock prices fell like nine pins for the second day in a row on Wednesday, erasing most of the gains made this year. Panic gripped the market as there were only sellers in most of the key counters. Heavy selling in derivatives market was also a key factor for the sharp fall in the spot market.
Brokers said there were not major negative factors pulling down the prices but the absence of heavy buying at higher levels was affecting the market. There was some selling by FIIs but that was not affecting the market much, brokers said.
Amidst fears of heavy selling, FIIs were net buyers of equities to the tune of Rs 344 crore on Tuesday when the Sensex fell by 142 points.
The Sensex, which started the day firmly, slipped immediately. Selective buying at the lower levels lifted it into the positive zone for a brief period. However, selling pressure was seen almost across the board soon.
At close, BSE Sensex closed at 5,758.19, down 163.92 points (2.77 per cent) and on NSE, S&P CNX Nifty was down by 68.65 (3.63 per cent) at 1824.60.
With today's close, the BSE Sensex has lost 492 points (7.87 per cent) from its all-time high of 6,250 touched on January 9. Nifty is down by 9.43 per cent from its all-time high of 2,014.65 on the same day.
Mid-cap and small cap stocks that has seen the sharpest rise were the worst affected in today's trading as most of them fell sharply. Heavy selling in these stocks was seen from the decline of CNX Mid-cap index by 6.89 per cent and CNX 500 index by 5.21 per cent. BSE-500 index too slipped by 5.19 per cent.
The mood in the market was depressed with most of the brokers expecting further fall in the days to come. "If fresh buying does not come tomorrow, further fall is possible". The advance-decline ratio on BSE also indicated towards bearish sentiment.
Out of 2,166 shares traded, 245 advanced, 1865 declined and 56 remain unchanged.
Margin calls play spoilsport
Margin calls were once again the main factor for the sharp fall in the stock prices in Wednesday's trading, brokers said.
They said during the afternoon trading, margin levels declined below the permissible limits and with traders failing to pay the additional margins, financiers sold their shares in the market.
Several traders borrow funds to invest in the stock market and in case they are not able to bring their margin money (in case of a falling market), the financier sells their shares in the market.
In the past too, there have been occasions when the margin calls have led to sharp fall in the stock prices. There was also selling in the derivatives market as traders failed to bring the additional margins.
Brokers said in case there was further fall in the stock prices tomorrow, there is possibility of further margins call being triggered.
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