Bull operators yesterday liquidated long positions, forcing the Bombay Stock Exchange (BSE) sensex below the psychological 4000 mark. The report that the bodies of the Indian Army soldiers handed over by Pakistan were mutilated, led market players to believe that tension between the two countries could escalate further.
The sensex crashed 87.11 points or 2.14 per cent to close at the day's low of 3969.36. The 50-share National Stock Exchange (NSE) index, too, shed 20.70 points or 1.7 per cent to close at 1141.90 points.
The trend in pivotals was reflected in the broad market also with the CNX Nifty Junior shedding 41.60 points to close at 1961.35.
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The trading turnover continued to be much below average which confirms that institutional activity has declined. "Hence, today's crash was largely bull liquidation rather than actual fund-based selling," one broker said.
The combined turnover of the NSE and BSE stood at Rs 3,009.91 crore.
The net long positions at the end of yesterday's trading on the BSE came down by Rs 117 crore. This, coupled with Rs 17 crore pulled out by the foreign funds on Thursday seems to have dampened sentiments at the bourses. "Technically the market was due for a correction, which was witnessed yesterday," says S Gopalkrishnan, vice-president, equities, UTI Securities.
"The outcome of today's talks between India and Pakistan will be very crucial for the market. In case of any unfavourable development, the correction will continue next week too." he added.
Market sources further indicate that weak closing of BSE sensex could indicate a nervous trading session in the week ahead. "There is concern in the market about the border situation. This can also be seen from the fact that foreign inflows have slowed down," commented Simon Holdsworth, managing director ITC Threadneedle Asset Management. While the software stocks showed signs to weakness, the commodity stocks witnessed strenght. Particularly stocks in the cement sector witnessed sustained buying support.
As a result, even in weak market L&T firmed up and it touched the day's high of of Rs 293 at the BSE. It was among the few stocks that bounced back strongly from the day's low of Rs 282.60 to end the day at Rs 290.90. Other cement stocks inlcuding Indian Rayon and Grasim too exhibited strength. "There was not much of institutional selling yesterday," said Naresh Panjnani, vice-president, R K Chari Securities.