Free fall for markets as buyers go missing

Lack of interest among local funds, retail investors.

In tune with global trends, the market continued to be in reverse gear on Thursday, with the Sensex losing 3.15 per cent or 327 points to end at 10,071, while the broader Nifty slid 3.54 per cent to end the day's trading at 2,962, below the 3,000 support level.

Though the Sensex opened strongly, up by 73 points on the back of positive news from the US markets, the enthusiasm failed to last as some of the neighbouring Asian markets like the Hong Kong Hang Seng started sliding from the early hours of trade.

"There were two factors which led to the absence of buying support in the markets on Thursday," said Prakash Rajdev, chief dealer at Khandwala Securities.

"One, unlike the past, there was hardly any buying by mutual funds on Thursday; and two, some of the confidence of the retail investors seemed to have been eroded by the inexplicable fall yesterday. While mutual funds may be readying themselves for redemptions, the mood among retail investors may cross an important barrier if this kind of correction continues on Friday as well," he said.

The lack of buying support was evident in the movement of the major cross-sectoral indices like the Sensex and Nifty, which showed no sign of support throughout the day, maintaining a steady but steep downward course.

"It should be noted that even the US market, which had one of its worst falls on day before, was able to recover only about half of the ground overnight. FII concerns over interest rates in the US remained as strong as ever on Thursday as minutes of the US Federal Reserve's policy meeting posed more questions than it answered," said a broker with a large FII client base.

Concern about US interest rates piercing the 5 per cent mark by the end of this month had been leading to considerable outflows from emerging markets over the last one week, he pointed out.

Meanwhile, figures from NSE showed a net sale of Rs 122 crore on both exchanges by foreign institutional investors on Thursday, nearly a fifth of yesterday's figure of around Rs 650 crore.

The market breadth was weak, with nearly five times the number of stocks in the negative territory compared to advances on the BSE. All the sectoral indices ended in the red, with metal stocks, which were hammered due to further correction in the commodity markets, leading the pack of losers.

The BSE Metal index dropped by 5.61 per cent, followed by the Auto index (down by 4.8 per cent), the Oil & Gas index (down 3.45 per cent) and the BSE FMCG index (down 3.43 per cent).

All stocks on the Sensex except BHEL and ICICI Bank closed in the red on Thursday.

Maruti slipped by 7.23 per cent to Rs 682, Hindalco by 6.41 per cent to Rs 166, Tata Motors by 6.24 per cent to Rs 740 and L&T by 5.95 per cent to Rs 2,180.