The Hindu Business Line : Panic selling shakes Sensex

Rumours that the Prime Minister, Dr Manmohan Singh, may resign following the Government's failure to sustain momentum in PSU disinvestments, triggered panic selling during the latter half of the trading session on Friday.

All frontline indices, after registering smart gains in early trade, plunged over 2 per cent. By the time an official denial from the PMO came through, the markets had closed, dealers said.

The benchmark BSE-30 Sensex dropped 258.44 points or 2.40 per cent to 10,509.53. But the fall was higher considering that markets had risen 119.7 points in early trade. NSE's S&P CNX Nifty Index ended at 3,075.85 points, down 80.55 or 2.55 points from Thursday.

Recovery likely

Dealers said that markets may bounce back on Monday considering the sharp fall on Friday. Important market cues such as first quarter results by IT bellwether Infosys (July 12) and Bank of Japan's two-day board meeting to decide on a possible rate hike, after several years of zero interest rate regime (July 13-14), however, may force investors to stay on the sidelines during early part of next week, they added.

"We expect the Sensex to come down to 9,500-9,700 levels in the next few sessions itself. There could be further selling pressure if BoJ decides to end zero-interest rate regime," said Mr Ketan Dedhia, Managing Director, Nalanda Securities. "Nobody knows the exact exposure into Indian equity markets by funds borrowed from Japan," he said.

Major losers

Among the biggest losers on Friday were HDFC (down 5.14 per cent to Rs 1,162.80), Reliance Industries (4.64 per cent to Rs 1,031.85), Wipro (4.54 per cent to Rs 469.05) and Tata Steel (4.49 per cent to Rs 522.75). Only three stocks (ICICI Bank, Bharti Tele and NTPC) among the 30-Sensex companies ended in positive territory.