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SUSTAINED fall in key indices has forced big market players to unwind their position in the derivatives market. The margin calls have stepped up further pressure on players to reduce their leveraged positions in stocks and index futures.

According to market sources, negative sentiment and unwinding of positions have a cause and effect relationship and one affects the other in creating strong downward spiral influencing both cash and derivatives market. "This is precisely what has been happening in the market", commented an analyst.

Depression in the equities market has also prompted investors to seek redemption from mutual funds schemes.

According to market sources, the majority of the equity schemes - sector specific, balanced or otherwise - have begun to see redemption pressure. This, in turn, makes selling a compulsion for the fund managers.

"This could have been a time for buying at lower levels, but the funds have to adopt a defensive strategy and stay in cash to meet the emerging redemption," an industry insider said.

Portfolio management schemes (PMS) are also witnessing pressure from the investors, if not downright exit proposals, to shift from one to another scheme, a relatively safer bet.

They show their mettle

STEEL stocks are seen as one of the few defensive bets in a market in the pool of red.

According to market observers, Tata Steel and SAIL are understood to have been witnessing bargain hunt by a section of investors when some are exiting in the short-term.

In terms of current global and local demands, the local steel companies have neither suffered much of late and nor did they lose their pricing power significantly, analysts said.

Prominent broking houses maintain a strong `hold' recommendation for the frontline steel stocks at the current prices.

Tata Steel and SAIL on Wednesday finished down by 3.27 per cent at Rs 361 and by 5.29 per cent at Rs 55.45, respectively, with huge traded volumes.

Jayanta Mallick

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