The Hindu Business Line : Bears tear stocks apart

Mumbai, March 17 Seized by the global bear fever that has seen no abatement for over a week now, Indian stocks collapsed on Monday, sending the benchmark indices to their second steepest points fall ever.

The Sensex lost 951 points or 6.03 per cent, the most since January 21 this year when it lost 1408 points. The Nifty fell 5.11 per cent.

The Sensex also dipped below the 15,000-mark for the first time after the start of its bull run last year that took it up over 21,200.

The 30 share index finally closed at 14,809 points,

Bears Stearns issue

Reports that the US securities firm Bear Stearns had offloaded its positions in 25 Indian companies last week provided fresh negative trigger. (The US firm’s exposure in 25 companies included Dabur Pharma, Oriental Hotel, Sonata Software, Taj GVK Hotels, Karur Vysya Bank, and Madhucon Projects in which scrips there were several block deals, NSE data showed.)

The Bear Stearns crisis led to a sharp fall in the US market on Friday, and this was echoed across Asian markets on Monday.

“The news flow has been continuously negative. There is clear shift away from equity, to more liquid instruments and commodity,” Sujan Hazra, Chief Economist, Anand Rathi Securities said.

FIIs were net sellers for Rs 658 crore while the domestic institutional investors were net buyers for just Rs 211.48 crore.

However, against the FII holding of $150 billion in the Indian they have sold for less than $4 billion or 3 per cent of their holding since January so far, noted Mr. Hazra. “What is happening is that they are not taking fresh positions, and the volumes have come off,” he said. Fresh positions are not coming from HNIs and, retail investors, with very little coming from mutual funds and insurance companies. However, no big redemption has been happening among mutual funds, said Mr. Hazra.

“The insurance firms that have collected large sums in March as premia towards tax saving instruments are not deploying funds, waiting for the market to stabilize,” a stock broker said.

Some of the mid-cap companies were reporting forex hedging losses. Among them was Orchid Chemicals and Pharmaceuticals Ltd which fell by almost 40 per cent after reports that the company had exposure to forex derivatives, leading some funds to exit their positions in the company.

Bank stocks bear brunt

The already battered banking sector stocks faced more selling than other sectoral stocks, some of them hitting their 52-week lows. BSE Bankex fell 9.06 per cent. Only the consumer durable index fell more, by 9.69.

ICICI Bank, the second most heavyweight stock on the Sensex lost 13.76 per cent, while SBI touched Rs 1,600, the same price fixed for its 16,000 crore rights issue that closes Tuesday (March 18).

The rupee opened lower at 40.70/72 against the dollar, reacting to the cut by the US Federal Reserve. The meltdown in the domestic stock market pushed the local currency to an intra- day low of 40.83. It, however, recovered later to close at 40.72/73 (40.44/45.)

Striking a contrary note were the five listed gold Exchange Traded Funds (ETFs). Kotak Gold ETF went up 5.1 per cent, while Benchmark, UTI, Quantum and Reliance ETFs posted their 52 week highs on the back of the surging spot gold prices which these ETFs closely track. Gold prices touched an all-time high of Rs.13,495 per 10 gram on Monday surging by Rs 385 or 2.9 per cent.