Suresh Krishnamurthy

MARKET capitalisation of stocks listed in National Stock Exchange declined by 4.2 per cent or nearly Rs 89,000 crore as the correction that threatened to step in on Wednesday finally arrived.

The undertone had been decidedly bearish on Wednesday itself. Nearly 783 stocks declined on the NSE while only 85 registered advances. That trend continued on Thursday with only 18 stocks gaining while 853 lost value.

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The effect was however more pronounced, as large-cap stocks, that had escaped the battering on Wednesday, too were unable to hold on to their perches. NSE's market capitalization had touched record high levels of Rs 21,09,365 crore only on Tuesday. The market has since declined 5.1 percent or Rs 1,08,000 crore in the past two trading sessions.

The huge decline in share prices came on the back of massive trading volumes as talk of investigation and scams had their desired effect. Trading volumes at NSE were about Rs 8,258 crore, less than Rs 9,217 crore recorded on Wednesday.

It was still much larger than volumes recorded since the beginning of the month. Barring the last three trading sessions, trading volumes at NSE did not cross Rs 7,600 crore in September. Number of trades at 31.8 lakh was not far away from the record of 33.6 lakh trades registered on Wednesday.

Predictably, mid-cap and small-cap stocks turned out to be the biggest losers. At BSE, 480 stocks, nearly one of every five traded, registered losses of nearly 10 per cent or more. 1,314 stocks, that is one out or every two traded, had hit the lower circuit. But for the lower circuit of 5 per cent imposed on a number of trade-to-trade stocks, loss in value may have been even more.

BSE's Midcap Index declined 5.6 per cent while BSE Smallcap Index lost 7.6 per cent. BSE 200 representing large-cap stocks lost a relatively lower 3.6 per cent.

Interestingly, all 50 Nifty stocks declined while 48 out of the 50 Nifty Junior stocks suffered the same fate. Stocks of public sector companies, consumer durables and metal stocks bore the brunt of the market downturn.

Major losers included stocks of Hindalco and Tata Steel. Both the metal majors have unveiled mega expansion plans. Hindalco has also announced a rights offer aggregating to Rs 2,500 crore.

Stocks of financial services companies appear to have come for special attention from the bears. The stock of Indiabulls and Reliance Capital declined by nearly 15 per cent on top of the 5 per cent decline recorded on Wednesday.

Stocks of Geojit Financial, India Infoline and IL&FS Investsmart shed between 8 and 10 per cent. Stocks of DSP Merrill Lynch and JM Financial, sponsors of asset management companies, also shed 10 per cent. In contrast, Birla Global Finance and Tata Investment Corporation, which are also sponsors of asset management companies, got away lightly with a loss of less than 3 per cent.

Stocks that bucked the trend on Thursday included FCS Software, Sesa Goa, Pidilite, Mahindra GESCO and PSL. FCS Software had been listed only on Wednesday. The stock gained 20 per cent to close at Rs 214. The stock had been offered to the public at Rs 50 per share in August 2005. Other stocks that braved the odds and emerged relatively unscathed included Thermax, CRISIL, ICICI Bank, Blue Dart Express and ABB. A number of healthcare sector stocks such as Glenmark Pharma, Cadila Healthcare, Pfizer, Dr Reddy's, Sun Pharma and Unichem Labs also ended the day with light losses.

Capital goods and healthcare sector were amongst the least hit by the market mayhem on Thursday.

(This article was published in the Business Line print edition dated September 23, 2005)
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