| FM breather for domestic markets.
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| It was mayhem on the stock market for the second day running, forcing the exchanges to halt trading within seconds of opening, and sending the Bombay Stock Exchange's Sensitive Index (Sensex) to its biggest two-day decline in almost four years.
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| Domestic shares took cues from falling Asian markets, where the region's benchmark Hang Seng had its biggest decline since April 1990 on concern that the global economy is slowing.
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| However, investors could get a breather tomorrow as the Federal Reserve cut interest rates 75 basis points early Tuesday, in an emergency move to hold the US economy from slipping into recession.
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The Fed rate cut immediately pushed up US stock futures in London from the day's low. However, at 9 pm local time, the US Dow, which opened later, was nearly 100 points down as many analysts interpreted the knee-jerk reaction by the Fed, as confirmation of a US recession. The second reason for a possible rally tomorrow is the government's advice to banks to be more lenient towards broking houses to meet liquidity problems.
| Indices | Value | Net chg | % chg | | DOW JONES* | 11967.94 | -131.36 | -1.09 | | FTSE 100 | 5740.10 | 161.90 | 2.90 | | Asian Index | Jan 22,08 | Change | % chg | | HANG SENG | 21757.63 | -2061.23 | -8.65 | | JAKARTA COMPOSITE | 2294.52 | -191.35 | -7.70 | | SHANGHAI SE COMPOSITE IX | 4559.75 | -354.68 | -7.22 | | TAIWAN TAIEX | 7581.96 | -528.24 | -6.51 | | NIKKEI 225 | 12573.05 | -752.89 | -5.65 | | *At 11.25 pm (IST) |
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It was a day of fast-changing developments, beginning with the trading halt due to the 10 per cent fall in the benchmarks immediately on opening, followed by Finance Minister P Chidambaram's attempt to sooth investor sentiment, big buying by domestic insurance companies and higher sales by foreign funds.
| TOP SENSEX LOSERS | | Name | Jan 22 | % Chg* | | ONGC | 962.35 | -13.62 | | ITC | 183.95 | -9.54 | | Hindalco | 150.40 | -9.37 | | Mah & Mah | 611.10 | -9.14 | | Ambuja Cem. | 116.25 | -8.57 | | Cipla | 174.95 | -8.14 | | HDFC | 2480.30 | -8.10 | | Reliance Ind | 2358.05 | -7.32 | | TOP SENSEX GAINERS | | Bharti Airtel | 849.30 | 2.54 | | Tata Motors | 658.25 | 0.72 | | * Over prev close | | ADVANCE/DECLINE | | | BSE | NSE | | Advance | 150 | 61 | | Decline | 2268 | 1085 | | Unchange | 35 | 8 | | Total Traded | 2453 | 1154 |
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| Big purchases by local institutions, which bought a net of Rs 2,778 crore on Tuesday, and bottom fishing by select foreign funds, helped the Sensex close at a relatively respectable 16,729.94, down 875.41 points, or 4.97 per cent from Monday "" an improvement over the crash earlier in the day.
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| The plunge on Tuesday was exacerbated because financiers who had lent money to investors to buy shares started to demand repayment. Retail investors typically contribute 10 to 20 per cent of their purchase, with brokers providing the reminder.
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| When the market slumps, the 10 per cent investment is wiped out, so financiers demand another cash deposit, known as a margin call, or sell their clients' remaining holdings to recoup losses.
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| Brokers blamed the over-zealousness on the part of the exchanges in collecting margins by selling the shares held as deposits for the drastic fall on Tuesday. "Nowhere in the world we have seen stock prices hitting the circuit filter and a halt in trade four times in last four years," said a broker.
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| "We get cheque payments from clients which will take minimum of two days to get credited into our accounts. The exchanges are not ready to wait so they sell the securities to account for additional margins. The only way to get rid of this systemic failure is to implement Real Time Transfer System at all banks as early as possible," he added.
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| With yesterday's fall, which saw the market value wiping off another Rs 3,97,750 crore, the total market cap loss from peak now stands at a whopping Rs 18,05,110 crore.
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| "A lot of bloodshed has taken place already. We find values in several sectors including capital goods, infrastructure and power equipment. But India is not decoupled from the rest of the world. Foreign funds are booking profits as the markets have been going up for the last three years," said Jignesh Shah, head of equities (private banking), ABN AMRO Bank.
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| Many banks are planning to assist brokers to avoid defaults, following the finance ministry's advice.
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| Meanwhile, Life Insurance Corporation (LIC), the country's largest financial institution, bought shares worth Rs 650 crore on Tuesday, over and above the Rs 900 crore of purchases made since the market slide began last week. On normal days, LIC's trading volumes in shares is around Rs 100 crore per day.
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| However, the sharp fall in stock prices has given LIC an opportunity to buy shares of many fundamentally strong companies at attractive valuations. LIC has a strong preference for large-cap stocks that form the Nifty index.
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| On a drama-filled day, which saw investors rushing to issue "stop cheque" instructions to banks on their applications for Reliance Power's initial public offering (IPO), the Sensex crashed below the 16,000-mark "" the first time since 17 September, before the relief rally helped the market to recover most of the losses.
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| At one point, the Sensex plunged by massive 2,272.93 points, or 12.91 per cent, to the lowest level of 15,332.42. (This time the circuit was not triggered as the rules states that for a second halt in trades, the benchmarks should move 15 per cent.)
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| NSE's S&P CNX Nifty ended down 309.5 points, or 5.94 per cent, to 4899.30, the lowest since last September.
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| There was, however, no let-up in the sales by foreign funds, who sold a net of Rs 4,265.19 crore. This makes their net sales this month to Rs 31,856 crore.
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| "The rally was dominated in recent months by select stocks. At current prices the market look attractive. India, however, is not isolated by the global credit squeeze," said Alok Sama, managing director of Baer Capital, which is awaiting FII registration.
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| Reliance Industries dropped Rs 186.15, or 7.3 per cent, to Rs 2,358.05, after falling as low as Rs 2,120, its biggest decline in almost 16 years. Larsen & Toubro fell Rs 34.05, or 0.9 per cent, to Rs 3,655.40, after slumping 18.7 per cent.
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| Bharti Airtel rose Rs 21.05, or 2.5 per cent, to Rs 849.3. Reliance Energy, the best-performing benchmark stock in 2007, fell the most in 17 years on concern the market's slump may cap returns for investors in the initial public offering of its power unit. The stock dropped as much as 31 per cent before closing at Rs 1,716.35, down 3.4 per cent.
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| The biggest losers on Tuesday was the small and mid-cap stocks, which have come down by nearly 30 per cent from the peak on 4 January this year "" a massive loss in 13 sessions.
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| Realty (down 30.24 per cent), power (down 26.16 per cent) and metals (down 30.46 per cent), are the other biggest losers in the fall since early this month. |
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