Sensex suffers 383-point fall

US recession concerns, big IPOs are possible reasons.

Despite late buying, which helped Indian stocks recover most of the losses, key stock indices ended at a three-week low on Wednesday as investors pared their holdings on growing concerns of US recession and weak Asian markets.

Heavy liquidity squeeze due to big initial public offerings (IPOs), such as Reliance Power's Rs 11,700 crore issue, also could have accentuated the fall, which saw the benchmark Sensex closing at 19,868.11 points, down 382.98 points or 1.89 per cent. This is for the first time in 2008 the Sensex closed below the 20,000-mark.

During mid-session, the Sensex had lost 737.84 points (3.7 per cent), before late buying brought in a recovery of sorts. With Wednesday's fall, the Sensex shed 860 points in two days.

Broader S&P CNX Nifty ended at 5935.75 points, lower 124.05 points or 2.04 per cent from yesterday. Key American indices, such as Nasdaq Composite (down 2.45 per cent) and S&P 500 (down 2.49 per cent), and Asian indices, such as Nikkei 225 (down 3.35 per cent), Hang Seng (down 5.37 per cent) and Seoul Composite (down 2.4 per cent), were deep in the red. Fund managers chose to downplay Reliance Power's IPO, currently open for subscription, stating that Wednesday's fall was due to global factors.

Fresh inflows from foreign institutional investors (FIIs) have not come in despite the number of FII registrations surging. FIIs feel that valuations in India have run ahead of their earnings potential.

"We have been selective in fresh investments. We prefer to be stock specific in times like these when market valuations are not exactly comfortable," said Balakrishnan Kunnambath, Global Market Manager (Indian Subcontinent), SG Private Banking (Asia Pacific).