Sensex under bear grip, sheds 101 points

Bears are making their presence felt on Dalal Street. The benchmark Sensex plunged more than 2.39 per cent, or 101 points, on concerns that ...

Bears are making their presence felt on Dalal Street. The benchmark Sensex plunged more than 2.39 per cent, or 101 points, on concerns that foreign inflows could taper off amid fears over the progress of the government’s privatisation programme and the fall in the rupee value. Day traders and hedge funds sold across the board, pulling down stocks sharply.

The reasons…

• That foreign inflows could taper off.
• Fear over the progress of the privatisation programme.
• The fall in the rupee value.
• Margin selling by banks.

Up 16 points in opening trades, the 30-share BSE Sensitive Index (Sensex) eventually ended with a massive loss of 101.20 points, or 2.39%, at 4,134.15. The Sensex had lost 39 points on Wednesday.

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The NSE S&P CNX Nifty Index also declined 39.25 points to end at 1,302.35, having come off from the day’s high of 1,342.60.

While selling pressure came from hedge funds in the latter half of trading, several domestic funds also indulged in basket selling in Sensex stocks. With huge positions having been built up in the futures segment of the market, there was a good amount of unwinding after recent gains.

Analysts expect inflows to be affected by the recent court decision to halt sale of government stake in oil companies HPCL and BPCL. “There are no fresh triggers…. to top it, the outstanding positions are huge,” said a dealer.

The BSE index is still up about 45 per cent from a six-month low in late April and the rally was fired by massive foreign inflows. But two straight days of net sales earlier this month raised doubts about more inflows. Still, their net investments in September stands at $488.8 million, taking their net inflows in 2003 to $2.7 billion, almost four times their investments in 2002.

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The market opened in positive territory, but lost ground immediately as selling pressure resumed. With no bargain hunting forthcoming, the market ended sharply lower, adding further to its recent losses. However, HPCL recovered.

Margin selling —selling of shares which are held against loans—by banks pulled down stocks later in the day after further after an early fall. Margin traders provide funds to investors for acquiring stocks. However, once these stocks decline below a notified margin, they offload stake to insulate losses.

Reliance Energy (down 5.17% to Rs 327.35) ended sharply lower as selling pressure continued after recent gains. Banking heavyweight SBI (down 4.95% to Rs 403.80) dropped on selling pressure in the futures segment. Other heavyweights Hindustan Lever (down 3.44% to Rs 178.30), Reliance Industries (down 2.79% to Rs 394.05) and ITC (down 0.97% to Rs 773.35) contributed significantly to the 100-plus point fall in the BSE Sensex.