Late basket selling drags down markets

Sensex falls 1.2% to end at 20,635; Nifty drops 1.3% to end at 6,123

Stock indices fell about 1.3 per cent on Wednesday in a late sell-off, ahead of release of the US Federal Reserve's October policy meeting minutes. Investors will scour through the Fed minutes for hints on when the American central bank would start the rollback of its massive bond-buying programme - Quantitative Easing (QE3).

Speculation is rife that the late plunge in the stock benchmarks was triggered by basket selling of Nifty stocks by a Switzerland-based foreign institutional investor (FII).

Indices were trading with marginal losses till 2.45 pm.

The BSE's Sensex fell 255.69 points, or 1.2 per cent, to close at 20,635.13. The National Stock Exchange's Nifty dropped 80.45 points, or 1.30 per cent, to end at 6,122.90.

FIIs net purchases data on Wednesday paled in comparison with their recent purchases. These investors bought shares worth Rs 80 crore on Wednesday, according to provisional data. In November so far, the average daily FII purchases of Indian stocks have been Rs 568 crore.

Analysts said few in the market were able to profit from the sharp fall in the indices late on Wednesday, as most expected a range-bound trade.

"Traders were cautious around 6,200 levels, as it was the pull-back rally but sideways trend has kept traders aside and due to that they failed to sell short when actually the market started falling," said Shrikant Chouhan, head-technical research, Kotak Securities.

The sentiment could turn nervous if investors interpret parts of the Fed minutes as a signal of a rollback. A section of the market believes the October 30 meeting minutes have lost a lot of their significance after comments from Janet Yellen, the next Fed chief, last week that the QE3 could continue for a while.

Bank shares led downsides on profit booking. The NSE Bank Index, which fell close to two per cent on Wednesday, rose over six per cent in the previous three sessions against a 3.6 per cent gain in the benchmark Nifty.

Among blue chips, Reliance Industries ended 1.8 per cent lower and Bharti Airtel slumped 2.1 per cent.

Lenders, which were among the recent biggest gainers, retreated. ICICI Bank fell 2.84 per cent, while HDFC Bank ended 1.6 per cent lower.

Infosys fell 1.2 per cent after hitting its highest level in nearly three years on Tuesday.

However, among stocks that gained, Wyeth surged by the daily limit of 20 per cent after saying its board will meet on Saturday to consider a merger with Pfizer Ltd, the Indian unit of US drug maker Pfizer Inc.