Dalal Street was left stunned on Thursday when the Sensex fell over 600 points. Though the fall was not unexpected, nobody had expected it to be so steep.

Eyebrows were not raised when the index fell 300-400 points. But after the European markets opened weak, the index plunged alarmingly.

A 5 per cent intraday rise in Brent crude and high rollover in the Futures and Options segment led to the biggest drop the Sensex has seen in the last nine months.

Mr Avinash Gupta, Vice-President of Research Equity, Bonanza Portfolio, was at a loss for words when asked about Thursday's crash. “Overnight, when crude prices dipped, we were expecting a fall. But what we saw today has left us shocked,” he said.

The Sensex, which opened in the red, nosedived 612 points from its previous close during intraday trade. It closed 546 points, or 3 per cent, down at 17,632. The broader Nifty shed 3.21 per cent to close at 5,262.7.

Crude prices above $100 a barrel is something the Indian economy cannot handle, said Mr Gupta, adding that it will slow down growth and feed into inflation.

The selling was broad based with the BSE Midcap and Smallcap indices falling close to 3 per cent each. On the BSE, 2,217 stocks declined and only 651 advanced. More than 200 shares hit the lower circuit.

Big losers

The biggest losers among the Sensex scrips were Tata Motors, Jai Prakash Associates, ICICI Bank and Jindal Steel, all losing between 7.5 and 4.9 per cent. Among the sectoral indices, the BSE Bankex, Consumer Durables, Capital Goods and Auto were the worst hit.

The volatility index on the NSE jumped 6.21 per cent to close at 28.20, its highest in the last eight months. The index measures the cost of 30-day options on the Nifty, and increases usually coincide with falling prices.

“Over the last fortnight we have been telling our clients to avoid buying Indian equities until about June end when we expect the market to bottom out at around 16,000. This is the level at which most of the bad news will be factored in. If the market does reach this level before June end, it is a good level to enter,” said Mr Saurabh Mukherjea, Head of Equities at Ambit Capital.

Continuing political uncertainty, the onset of an economic slowdown, which could show up in the Q4 GDP numbers, and the weakening of PAT margins in FY12 by around 300 basis points are good reasons to keep away from Indian stocks, he explained.

Foreign investors were net sellers on Thursday. Domestic institutional investors were net buyers for Rs 1,029 crore.

Retail investors too were net buyers, for Rs 139 crore. “Retail investors will now take a call on the stock markets after the Budget on Monday. They have been almost absent from the stock markets what with no one being able to predict its direction,” said Mr Alex Mathew, Head of Research at Geojit BNP Paribas Financial Services.

Mr Saurabh Kaushal, a retail investor in Mumbai, said he will heed his broker's advice and invest only when he is told to do so. “I did lose quite a bit of money two years back. I do not want a repeat of that.”

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