The ongoing political crisis at the Centre took its toll on the capital markets yesterday as the Bombay Stock Exchange (BSE) sensitive index crashed by 302.64 points, closing at 3,360.89 against a previous close of 3,663.53 on Friday last.
This slide of 8.26 per cent is the sharpest fall witnessed by the sensex since the stormy days of the securities scam in 1992.
Stockbrokers were unwilling to take fresh positions at the major bourses, which was clearly reflected by the trading volumes at the National Stock Exchange (NSE), which touched the previous low of Rs 170.63 crore, recorded on November 20, 1995.
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Foreign institutional investors (FIIs) and mutual funds also largely maintained a low profile, apparently choosing to await further political developments.
Kerb trading remained weak, with key pivotals dipping even lower.
The Reliance scrip price touched Rs 252, against an official closing level of Rs 256, while the State Bank of India scrip plummeted to Rs 261 (Rs 272.75) and Tisco dipped to Rs 155 (Rs 160) .
By the end of yesterdays trading session, both the BSE and NSE were forced to take emergency measures to ensure that the market did not collapse under a payment crisis.
The NSE relaxed the 7 per cent internal price band to 10 per cent for all stocks, while the BSE raised its net exposure margins for the Rs 1.5 crore-Rs 5 crore range from the existing 10 per cent to 15 per cent for the current settlement, effective from today.
NSE managing director R H Patil said the price band change was done in consultation with the Securities & Exchange Board of India, which has maintained a 10 per cent price band for all scrips.
A dealer at a leading institutional brokerage explained the price difference between closing prices on the BSE as well as the NSE as arising due to variable price band structures.
Explaining the low trading volumes at the NSE, he said: The NSE has price bands which are stricter compared to other bourses. The market witnessed only sell orders and since they could not be executed on the National Stock Exchange, business shifted to BSE. If the price differences between the two bourses continue in this manner, the market may witness defaults or a payment crisis in future.
There was no trading for Indian GDRs at the London markets, which have been closed for trading since Friday on account of Easter vacations. Marketmen expect the prices of most Indian offerings to take a beating when the markets reopen today, with the domestic market sentiment turning weak.
On the Calcutta Stock Exchange, brokers with huge plus positions were caught on the wrong foot; all market operators wanted to offload their stocks and square up their positions but the Sebi directive fixing the daily price band of scrips at 10 per cent prevented any active trading on any of the major counters.