The Hindu Business Line : Market goes into a tailspin — Reform blues impact; over Rs 1,00,000 crore wiped out

THE Day After... ..! It was carnage on the bourses. Stock prices fell like ninepins on Friday as fears of a possible slowdown in economic reforms and disinvestment, jolted the market.

The brave face put up by the financial markets on Thursday wilted away as major stock indices plummeted to historic lows. Brokers said over Rs 1,00,000 crore of market capitalisation was wiped out today, probably the highest ever in a single day.

Weak trend in the various international markets, particularly in the emerging ones, also dampened the local sentiment.

There was heavy selling across the board by domestic and foreign investors. According to brokers, the trigger for the big fall today was early selling by hedge funds. This was followed by short-sellers who took advantage of the uncertainty to pull down the stock prices.

Margins call further played havoc in the market as the NSE's S&P CNX Nifty index witnesses its highest fall in a single day. Even the BSE's Sensex saw the third highest fall in its history.

At close, BSE Sensex was down by 329.60 points (6.10 per cent) to close at 5069.87 and NSE's S&P CNX Nifty was down by 135.1 points (7.87 per cent) at 1582.40.

The statements on disinvestments made by the Left parties led the market to believe that the new government would not be capital market friendly.

"Indiscriminate comments made by political parties on the economic agenda of the new government affected the market," said Mr Ambarish Baliga, Vice-President, Karvy Stock Broking.

Globally emerging markets are weak and India cannot be eliminated from this trend, he added.

PSU stocks were the worst affected on fears that the new Government may halt the disinvestments process. The BSE-PSU Index was down by 14.14 per cent in today's trading with stocks such as HPCL, BPCL, IOC, ONGC and GAIL taking the biggest hit.

Banking sector stocks, the favourite of the FIIs, were hit on concerns that banking sector reforms would take a back seat. The BSE Bankex Index was down by 10.59 per cent.

Brokers said in today's trading, FIIs were major sellers in most of the index counters and in mid-cap stocks where they had taken exposures in the last few months. The unexpected crash in stock prices has prompted most stockbrokers to have a second look at their investment strategy. "We now have to go back to the drawing board to decide our strategy," said a broker.

He said it all happened in such a short time that it is difficult to decide on what to do right now.

However, some brokers said that today's crash is an overreaction by the market players and at current levels, valuations look attractive for several companies. "Some stocks look attractive on dividend yields and are good for investment," said an analyst.

"This is the time to pick and choose companies that are going to perform well irrespective of economic policies and invest in these scrips, as and when they come into attractive price ranges. It does not make sense to invest based on the index," said Mr Maulik Sharedalal of Kaji & Maulik Securities. Market players do not see significant renewal of confidence in the near future.

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