The Hindu Business Line : Sensex tumbles, triggers trading halt, recovers 1400

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Sensex tumbles, triggers trading halt, recovers 1400

FIIs net sellers at over Rs 2,000 crore

Our Bureau

Mumbai, Oct 17

SEBI’s proposals of Tuesday curbing FII investments through participatory notes turned FIIs into net sellers overnight, plunging the markets in early trade to their circuit breaking thresholds, leading to temporary suspension of trading itself on Wednesday.

FIIs – net buyers in the market practically every day of the rally since September 18 – were net sellers on Wednesday for Rs 2,012 crore on the NSE and the BSE, provisional figures showed.

Having digested SEBI’s proposals on participatory notes after dinner on Tuesday, stock market players on Wednesday woke up to trade at 9.55 am, fully resigned to a day of declines.

taken by surprise

But even they were taken by surprise when – even before the clock could strike 10 – the very ground moved from under their feet, and a landslide happened, triggering circuit breakers that suspended trading altogether for an hour on both NSE and BSE.

In just under a minute of trading, the 50-share S&P CNX Nifty which had opened at 5,658.9, plunged by over nine per cent.

The BSE Sensex took a few minutes more to fall 730 points from its opening of 18,037.90. (From its previous close of 19,051.86, this meant a fall of more than 1,700 points.)

“Before we could say ‘Palaniappan Chidambaram’, trading was over,” said a sub-broker.

Indeed it took the combined statements of the Union Finance Minister, Mr P. Chidambaram, and the regulator, SEBI, to reassure market participants. When the markets opened an hour later, they ground back their way upwards, the BSE closing at 1.76 per cent and the NSE 1.92 per cent below their previous close.

The Finance Minister clarified that it is only foreign investment through one particular route that was being restricted. SEBI clarified that there is no proposed bar on offshore derivates instruments contracts expiring this month or in the following months being renewed, provided the renewal does not go beyond 18 months.

“It is further made clear that this proposal does not in any manner seek to restrict renewal or rollover of Indian Exchange Traded Derivative Contracts by the FIIs.”

“People misinterpreted SEBI’s proposals, said Mr Deven Choksey, Managing Director of K.R. Choksey Securities. “They thought renewal of contracts would not be allowed from next month itself. So they took their call and started to place basket orders which they could not change once trading was suspended. When trading resumed, these orders went through and people had to go for short covering again, which resulted in a bit of a rally.”