The Hindu Business Line : Sensex drops below 13,000 as markets take a beating

Mumbai, July 1 A pall of gloom fell on Dalal Street on Tuesday as the BSE benchmark index Sensex slipped below the psychological 13,000-mark – the level last seen more than a year ago – with stocks coming under heavy selling pressure.

The broader index S&P CNX Nifty also breached the 3,900 support level for the first time since April 2007.

A host of negatives such as weak European markets, high oil price, rise in interest rates and fears of inflation dampened investors sentiment throughout the day.

The Sensex fell by 3.71 per cent and ended the day at 12,961, shedding almost 500 points. Sensex closed below the 13,000-mark for the first time since April 5 in 2007. Nifty was down by 3.56 per cent and closed at 3,896.75.

FII selling fears

“Market was very apprehensive today as there were fears that the FIIs will accelerate selling and on the other hand there has not been any buying support from the domestic institutions,” said Mr Sanjay Sinha, Chief Investment Officer, SBI Mutual Fund.

The cues from the European markets, which witnessed heavy sell-off as they opened weak due to negative news on the home prices, mortgage approvals and consumer confidence, have impacted domestic markets, said a stock trader.

Foreign institutional investors were net buyers at Rs 209.43 crore on Tuesday while the domestic institutions were net buyers at Rs 162.5 crore.

While the provisional data on account of foreign institutions do show that they were net buyers, heavy selling was noticed in the FII and HNI (high net worth individuals) counters, said brokers.

Some institutions would have been forced to wind up their positions, which accelerated selling pressure, said Mr Ajay Parmar, Head of Research, Emkay Global Financial Services.

“Some hedge funds went in for heavy selling as automatic redemption is triggered when their capital has already lost more than a certain value,” said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets Ltd.

Europe impact

European markets witnessed heavy selling on account of reports that UK home sales have been lowest since 1992. In addition, there is a fear that the crisis in the real estate and housing might not be limited to the US economy alone but is spreading to Europe also, said the head of research of a mutual fund.

“Nifty has fallen below its crucial support and is expected to test further lower levels in the medium term. Market is looking for positive cues, but getting only negative ones. As long as the crude remains very strong, upside is capped and we may see panic bottoms,” said Mr Alex Mathew, Head of research at Geojit Financial Services Ltd.

Sectoral indices

The dampened sentiments in the markets due to a mix of global and domestic concerns led all the sectoral indices to end in the red today.

Amongst the sectoral indices on BSE, Realty slumped 7.21 per cent, Bankex fell by 5.62 per cent, Metal (5.40 per cent), Auto (4.91 per cent), Consumer Durables (4.28 per cent), Power (4.24 per cent), PSU (3.61 per cent), Capital Goods (3.34 per cent), TECk (3.07 per cent), Oil & Gas (3.06 per cent), FMCG (2.83 per cent) and Health Care (2.17 per cent).

“Even though the rupee has fallen below the crucial support at 43.10, IT stocks faced heavy sell-off. The rupee may depreciate against dollar further in the coming days,” said Mr Mathew.

In the case of banking stocks too there was substantial sell-off as major banks raised interest rates on home loans and other retail lending, according to market men.

The market breadth was extremely negative with 2,272 stocks declining, and only 406 stocks advancing on BSE.

Amongst the worst hit were Reliance Communications Ltd and Reliance Infrastructure, which fell by more than 10 per cent, Mahindra & Mahindra, which dropped by 9.27 per cent, Maruti Suzuki (down 8.05 per cent) and SBI (down 7.81 per cent).

The only Sensex stock to end the day in green was NTPC Ltd, which gained 1.02 per cent.

On the NSE, 491 stocks out of 1,249 stocks traded hit their 52-week lows, while on the BSE 524 stocks hit the lower circuit as against 68 that hit the upper circuit.

“This was the last leg of the fall where retail investors were selling mid-cap and small-cap stocks heavily,” said Mr Amitabh Chakraborty, President (equity), Religare Securities Ltd.

The benchmark Sensex has fallen by 39 per cent from its all-time high mark of 21,206.77 touched on January 10 this year. From a recent high of 17,600.12, which it hit on May 2, 2008, the Sensex has fallen by 26.35 per cent.