Key stock indices erased most of the gains in the later part of the day and closed lower. The reason: Weak global markets and concerns over subcription of NTPC’s follow-on-public offer.
Markets players said most of the selling was from hedge funds.
The Bombay Stock Exchange’s (BSE’s) 30-share Sensex fell 192.59 points, or 1.18 per cent, on the back of sell-offs in all major Asian markets.
The markets opened in the green but started losing steam in early-morning trades. Jaiprakash Associates, Grasim and Reliance Communications were the three top losers among the Sensex stocks. Real estate and banking stocks led the downward march. The BSE Bankex fell 1.99 per cent.
“A correction has been eluding us for some time and the present fall is not something that should cause investors to worry. This was triggered by US President Barack Obama's statements on regulating hedge funds and a hike in interest rates in China. There is a feeling among some institutional investors that the US markets are recovering and therefore there is a trend of money flowing back,” said Hitesh Aggarwal, head of research, Angel Broking.
Reliance Industries, which has the highest weight in the Sensex, shed 1.9 per cent. ICICI Bank fell 1.85 per cent and HDFC Bank dropped 1.3 per cent. There were only four gainers in the Sensex. Aggarwal said the fair value of the Sensex was 21,000 over the next 15-18 months and investors need not be overcautious.
NTPC, which announced the floor price for its follow-on public offer (FPO) on Tuesday, was among the top losers. It fell 2.46 per cent. “NTPC is fairly valued at this point in time and investors should not expect to make huge gains by buying the stock at present levels. It’s a buy for the long-term and therefore a class of investors is apprehensive about subscribing to the FPO,” said Aggarwal.
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At the National Stock Exchange (NSE), the 50-share S&P CNX Nifty closed at 4,830.1 points, as against the previous close at 4,899.7 points, a loss of 1.42 per cent, or 69.6 points. Broader markets also closed in the red, with the BSE midcap index down 1.19 per cent and the BSE small-cap index falling 0.77 per cent.
According to provisional data with the NSE, foreign institutional investors were net sellers worth Rs 455 crore. The market breadth was negative with 1,105 advances and 1,788 declines.