Extra margin pressure pulls Sensex 96 pts lower

Market sources attributed yesterday's fall largely to major operators who cut positions in the derivatives segment to avoid paying enhanced margin requirements. Turnover on the National Stock Exchange's (NSE) futures and options segment climbed from Rs 9,336 crore yesterday to Rs 12,520 crore.

The NSE released a list of 19 stocks on Friday calling upon clearing members with over-the-limit exposures to pay enhanced margins. The demand for 10-25 per cent margins on the "revised exposure limits" came into effect from yesterday, leading to widespread paring of positions in the futures and options segment and a cascading effect in the cash market.

There were unconfirmed reports of the NSE shutting 14-15 trading terminals of a few brokers for non-payment of additional margins. NSE officials, however, were not available for comment.

The margin conundrum played on the already weak sentiment in the markets. There were 312 gainers against 999 losers on the BSE. Losers have outnumbered gainers in the last three trading sessions. In the last seven trading days, declines have exceeded advances on five.

Yesterday's fall was led by ACC, which lost 5.2 per cent at Rs 198.75. Hindustan Lever closed 3.06 per cent lower at Rs 188.60, Reliance Industries 2.69 per cent at Rs 467.90 and ITC 0.62 per cent to Rs 871.10.

However, the State Bank of India scrip held its ground, advancing 0.16 per cent to Rs 488.15. Mahanagar Telephone Nigam Ltd gained 1.73 per cent at Rs 117.80.

Foreign institutional investors were net buyers yesterday with purchases reported at Rs 318.9 crore, whereas mutual funds were net sellers at Rs 111 crore. FIIs have been net buyers of Rs 5,099 crore in October so far.

The complex interplay of factors led to a 153.23 point volatility in the Sensex, which touched a high of 4,880.66 and a low of 4,727.43 in intra-day trades. The NSE's S&P CNX Nifty closed at 1,506.50, 36.20 points lower than yesterday's close.

The total market turnover was almost Rs 1,500 crore higher. The BSE reported a turnover of Rs 2,720.70 crore, while the NSE reported Rs 5,990.18 crore.

Says an analyst from a local brokerage: "The market seems to be in circumspect mood with reports of FIIs selling index and stock futures, though the undertone is still positive with the trend in quarterly results being encouraging so far."