The Hindu Business Line : Tidal wave of selling pressure drags Sensex

THE Government's warning about the threat of a possible tsunami hitting the country's eastern coastline after a massive earthquake jolted Indonesia on Monday, fortunately, turned out to be a non-event. But the stock markets were not so lucky. Tuesday's tidal wave of selling pressure at the markets pummelled stocks to lows that were last seen only during early January this year.

The markets, which have been on a steady rise during the last few weeks, even bucking the usual negative trend during post-budget sessions, truly seemed to have set into a downward spiral. Tuesday's bloodbath at the markets has sent the chill down the spine of the average individual investor, so much so that the next few sessions are also unlikely to boost sentiment among this class of investors.

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A semblance of recovery and a possible shift back into bull-run mode was witnessed with the 68-point jump in the benchmark Bombay Stock Exchange Sensitive Index (Sensex) on Monday. However, that warmth and upbeat feeling was completely absent on Tuesday. The indices opened at nearly the level at which they closed the previous session, but never managed to breach that level into positive territory again after that right through the session on Tuesday.

There seem to be a number of reasons for the setting in of weakness in the markets. But, none of them are specific to any announcements that were made on Tuesday. The threat of a flight back of FII capital after the interest rate hike by the US Federal reserve, the slower investments coming in from FIIs and Indian institutions due to the approaching year closing, the steady appreciation of the rupee and the continued, worrying rise in the price of crude are all being cited as the possible causes for the massive sell-off on Tuesday.

At least three of these threats are unlikely to die down even after the next fiscal year begins. These include the possibility of a further rise in interest rates in the US, which might make investments in emerging markets such as India, even less attractive and the possibility of crude touching $60 per barrel.

Tuesday's bearish sentiment is also being attributed to pronounced weakness in many global markets, including key Asian stock exchanges. The lacklustre trading sentiment in the Indian bourses led to a massive slide in valuations across sectors and across stock groups. Though there was a marginal increase in buying support towards the end of the session, there was not sufficient volume to help the indices climb back substantially.

Stocks in industry sectors such as banking, pharma, information technology, metals, auto and public sector undertakings came under pressure. Oil stocks were also headed south due to fears that the continued dithering by the Government on hiking fuel prices will affect the bottom lines of these oil-marketing companies.

At the close of session on Tuesday, the BSE Sensex had lost about 143 points, despite gaining back about 40 points from its intra-day low of 6,327 points. With the current close at 6,368 points, the Sensex has lost over five per cent compared to its close on the day the Union Budget was presented in Parliament.

In all more than 80 per cent of all stocks recorded losses on Tuesday and there were a total of 28 losers to just two that posted gains from out of the Sensex 30. Traded volume of Sensex stocks was a low Rs 733 crore.

Major losers from among Sensex stocks were Dr Reddy's Laboratories, Hero Honda Motors and Tata Steel, all of which lost over four per cent, HPCL, HDFC, ITC, Reliance Industries, ONGC and Tata Power, all of which slipped by about three per cent and SBI which lost about 3.8 per cent.

The only gainers amongs the Sensex 30 were Bajaj Auto and HDFC Bank.

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