Sagging Sensex shocks investors

Small investors are unsure of holding PSU & banking stocks after the market crash

Gujarati investors are fearing a major decline in PSU and banking stocks with the beginning of formation of a Congress government at the Centre with the support of the Left.

The investors, uncertain about the divestment and labour policies to be adopted by the new government, fear that the stocks will lose value further in the volatile market.

The Bombay Stock Exchange Sensex declined to 5070 points from 5400 points, a loss of 330 points, the highest decline in a single day in the last three years.

"It was a blood bath for the investors today. It did not happen in the last three years. People were taken aback by persistent selling by FIIs. Large-scale selling by major FIIs resulted in the crash of the market and it also affected PSU and banking stocks," said Atul Choksi, chairman, Ahmedabad Stock Exchange Broker's Association said.

The major losers in the PSU stocks included ONGC, GAIL, HPCL, BPCL and IOC, while Corporation Bank, Indian Overseas Bank, Bank of Baroda, Oriental Bank of Commerce and State Bank of India also lost. The market sentiments were reflected in the stocks of state PSUs such as GSFC, GNFC and GACL.

Bakul Dholakia, director, Indian Institute of Management, Ahmedabad, said, "This is a panic reaction. The market will rise to become stable."

Stocks of Power Trading Corporation and Petronet LNG Ltd, which had so far showed steady gains, came down heavily on Friday.

"Soon after the Left cleared their stand on disinvestment, FIIs started selling and this resulted in the market dipping. This affected PSU and banking stocks. Small investors in the state are confused and could not take a stand whether to sell or to retain PSU and banking stocks," said Sandeep Vohra, a stock broker in Ahmedabad.

The market is expected to continue its downward trend till Tuesday and is expected to stablise around 4,900 points after the new finance minister is declared.

"Stocks of state PSUs were also affected though the government in the state is not going to change soon. GSFC was down 14 per cent, while GNFC lost around Rs 6," said Choksi.

"The market over-reacted to the comments made by the Left. Investors will have to wait and watch," said Nimish Bora, a stock broker.