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Our Bureau

Mumbai , Jan. 5

THE charging bull of the past several weeks paused to take a breather on Wednesday. Triggered by a number of factors, international and domestic, the Indian bourses let off steam with the Sensex losing over 316 points intra-day.

Though the markets demonstrated some recovery, the 45-minute carnage, left many investors gasping for breath.

The market opened shaky as all key international indices had closed lower on Tuesday. Added to this, metal prices, led by aluminium, witnessed a meltdown in the world commodity markets.

And if these were not reasons enough to worry, Standard & Poor's announcement that expressed concern about India's widening fiscal deficit also shook confidence about the robustness of the economy.

Inflows from foreign institutional investors (FIIs), who pumped in over $8 billion last year, showed signs of lagging with expectations that US interest rates could get hiked, leading to the dollar getting strengthened. A stronger dollar would result in FIIs having to realign their investment strategies. It was with all these concerns that the market went into trade at the opening bell. First, metal stocks, which have had quite a run up in the last several weeks, witnessed panic selling. This cascaded into other stocks and a market-wide slide began. By 12:30 p.m., Sensex had shed over 127 points. Even before market participants could make sense of what was happening, the index slipped further into the red.

Open positions in the forward markets were rather high. So the sudden drop of 50-100 points forced a lot of investors to square up on their positions and a several `stop-loss' levels were breached. This led the market to fall even further.

At 1:06 p.m., Sensex hovered at 6453, a loss of close to 200 points. Less than an hour later, the index touched its lowest point intra-day, 6,334.74, wiping out 316.27 points in a little over three hours of trade.

The recovery started almost immediately, with value buying, especially in the index stocks, and the Sensex started creeping up. In the next hour, the index recovered close to 125 points and ended the day's trade, very much in the red, yet leaving the market marginally relieved.

Despite the recovery, the Sensex ended the day shedding 2.89 per cent. The index lost 192.17 points from Tuesday's close and ended trade at 6458.84, wiping out Rs 24,400 crore in market capitalisation.

The Nifty slipped below the 2000 level briefly and touched an intra-day low of 1990.15. Overall, the index slipped 71.55 points to close at 2032.20.

The CNX Midcap 200 took a beating on Wednesday and touched a low of 2482. It had closed trade on Tuesday at 2654.1, indicating an intra-day loss of 172 points.

After the day's events had unfolded, brokers and investors were still struggling to find the real reason for the utter panic. "Corrections like these will only reset valuations. In fact, we have had strong inflows today, an indicator of smart investors making the most of the lower valuations. The bourses may be volatile and will react sharply to any news for the next several sessions," said Mr A.K. Sridhar, Chief Investment Officer, UTI Asset Management Company.

Despite Wednesday's scare, the market is still optimistic. "This market is fundamentally sound. Even if we are looking at corrections of 400-500 points, the market is still looking attractive and corporate results are by and large expected to be positive and justify current valuations," said Mr N. Sethuram, Chief Investment Officer, SBI MF.

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