Financial Daily from THE HINDU group of publications
Tuesday, May 18, 2004
Financial Daily from THE HINDU group of publications Tuesday, May 18, 2004 |
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Politics Markets - Stock Markets Panic selling reduces Dalal Street to rubble — Erodes Rs 2 lakh cr; Sensex sheds 842 intra-day; trading suspended twice Our Bureau
Angry stock brokers and investors shout slogans in front of the Bombay Stock Exchange building in Mumbai on Monday. — Shashi Ashiwal
Mumbai , May 17 THE spectre of "market-unfriendly" Left ideology having an overwhelming influence on economic policy-making at the Centre drove equity investors into a selling frenzy that saw the BSE Sensex fall 842 points before recovering about 300 points in late trade. The selling fury triggered, for the first time, index-based circuit filters that halted trading twice during the day, reducing trading time by three hours. Today's fall also eroded more than Rs 2 lakh crore in value from stocks. At close, the Sensex had fallen 11.41 per cent or 565 points, the second-biggest fall in the history of the BSE, to close at 4,505.26. The NSE's S&P CNX Nifty fell 12.24 per cent or 193.65 points to close at 1,388.75. The Sensex's biggest fall was on April 27, 1992 when the benchmark index fell 570.42 points as the securities scam was exposed. On Monday, a large group of traders gathered outside Jeejeebhoy Towers, the seat of BSE, and vociferously protested against the Congress-led alliance at the Centre "for shutting down the market". Equity analysts said that fears of a US interest rate hike, rising oil prices and a slowdown in the Chinese economy also played on investors' minds. International funds were sellers in almost all Asian emerging markets due to such global concerns. Mr Nimish Shah, Director & CEO, Parag Parikh Financial Advisory Services, said: "FIIs have gone underweight on Asian emerging market and India is a part of it. The current political situation has further aggravated the situation." International broking firm UBS has cut global weightage in equities to neutral from overweight in a report dated May 14. It has reduced exposure to Asia on "lingering China fears as well as consensus positioning in the region''. The firm has also scaled down emerging Asia weightage by two percentage points to 2.5 per cent. Foreign institutional investors were net sellers of Indian equities worth over Rs 500 crore on Friday. While the Dow fell nearly one per cent at open on Monday, the Nasdaq was trading about 1.5 per cent lower compared to its previous close. The Japanese Nikkei lost nearly 3.2 per cent by close and the Hang Seng index ended lower by 2.75 per cent today. In the morning, the Sensex crashed 550 points within 20 minutes of opening resulting in trading being halted for one hour both on the NSE and the BSE as the 10 per cent index-based circuit filter came into effect. It opened again at 11.15 a.m. but closed within two minutes after losing another five per cent, tripping the next filter. With today's fall, the Sensex has fallen 1,420.42 points since April 23, the steepest fall in such a short period of time. The previous such drop was between April 22 and May 18 in 1992 when the index slid 1,011 points. Meanwhile, the Securities and Exchange Board of India (SEBI) called an emergency meeting with stock exchange officials and later said that the exchanges had assured that there were no payment problems. The Reserve Bank of India (RBI) said in a statement in the afternoon that it had set up a task force under an executive director to assist the stock market with liquidity and smoothen payment mechanisms. Congress leader Dr Manmohan Singh said in a statement that the new Government at the Centre would give all possible assistance for the stock market's development. The assurances from Dr Singh as well as the regulators helped stabilise sentiment in afternoon trade. When the market reopened at 1.20 p.m., active buying was seen at lower levels.
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