The Hindu Business Line : FII selling drives Sensex down

For all the faith showed by domestic financial institutions and retail investors, the intensity with which the foreign institutional investors (FIIs) triggered sales in pivotals proved too much for the market to bear. And the result is a further 216 points decline in the Sensex, which closed at 14,141.52. At the NSE too, it was much the same story. The 50-stock Nifty index lost 1.69 per cent to close at 4,108.05.

Retail investors turned net buyers for another consecutive day to the tune of Rs 333.69 crore, when the BSE-30 Sensex recovered from the fall of over 570 points and dipped below the psychological-mark of 14,000. Domestic institutions were net buyers at Rs 1,944.48 crore, as per the provisional figures on NSE. Long-term investors and domestic institutions were quietly accumulating stocks at cheaper levels.

Rebound

The rebound in the markets was attributed to short covering by investors as soon as the European markets opened positive. “The reason for the rebound was the good amount of short covering and buying interest from domestic institutions,” said Mr Ravindra Kasliwala, Head – Equity, Inventure Growth and Securities.

Earlier in the day, the Sensex opened down 48.84 points but took a huge dip as the Asian markets signalled extreme signs of nervousness with Nikkei falling over five per cent as yen strengthened considerably against the dollar. Other Asian markets continued to trade in the red on fears of the credit crisis in the US. FIIs were on a selling spree with their net money outflow at Rs 3,535.76 crore with huge sell off from hedge funds.

Dealers said, major selling came in from Japanese funds and the impact of the ‘yen carry trade’ has started trickling.

However, investors globally may have something to cheer about finally as the US Fed cut discount rates by 50 bps.

“Markets recovered on a technical rebound. The US Fed’s decision to cut interest rates and the European indices trading in the positive territory today may lead the markets to open on a good note on Monday,” said Ms Shahina Mukadam, Head – research, IDBI Capital Market Services Ltd. “The Fed has helped to make credit more accessible to smaller and medium banks,” she added.

Mr Amitabh Chakraborty, President – Equity, Religare said, “In the US, the Fed has surprised markets by cutting the discount rate by 50 bps, resulting in a rally in Dow and Nasdaq.” But it is also an indirect indication that the sub-prime credit problem is much deep-routed than previously anticipated, he added.

Metal stocks took a beating yet again; the BSE-Metal index was the biggest loser, dipping 4.74 per cent.

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