The Hindu Business Line : Sensex closes below 9,000

The initial optimism stemming from a recovery in some Asian markets gave way under a fresh bout of profit booking, driving key indices into negative territory for the third consecutive day.

The BSE Sensex closed below 9,000 for the first time since December 8, 2005, ending the day at 8,929.44, down 133.21 points. However, the intra-day volatility that has plagued the markets for some time was in evidence once again, with the Sensex witnessing a 588-point swing intra-day (high-low) during the trading session. The Sensex has lost 28 per cent from its peak levels in May. The S&P CNX Nifty closed at 2632, down 30 points.

Dealers said that funds sold on rising concern over a US inflation report indicating that the Federal Reserve would continue to hike rates. FIIs were net sellers to the tune of $18 million on Wednesday. In June, overseas funds have been buyers to the tune of $188 million while local funds were sellers to the tune of Rs 1,715.64 crore, as per SEBI data.

"Given the market conditions, predictably, new fund offerings have been put on hold. This is also drying up liquidity for local funds," said a fund manager who expects the market to remain volatile for a few more trading sessions.

Fear psychosis

Reports that some leading private foreign banks have reduced their exposure to loan against shares fuelled the bear grip further. A fear psychosis has come in, with many investors liquidating their entire portfolio to preserve their capital and gains. "Signs of revival of a bear market can be seen," said the business advisory head of a leading broking house.

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