Markets in Down Syndrome

Sensex tumbles 452 points on Friday; investors lose Rs 4.3 lakh cr in 7 days.

Carnage on Dalal Street continued unabated today with the BSE Sensex losing 898 points intra-day.

Despite rebounding in the opening trades, the bears overpowered the bulls comprehensively and the benchmark index closed piercing the 11,000 mark to settle at 10,938.61, losing 452.82 points. The broad-based S&P CNX Nifty lost 142 points (4.19 per cent) to close at 3,246.90.

Market analysts said that all broking calls would now centre around mitigating as much risk as possible. With markets breaking various support levels continuously, no one is in a position to take a firm view on what direction the bourses will take next week.

The markets opened positive and a battered Sensex gained over 300 points in the first few minutes of trade after Finance Minister P Chidambaram termed the tax issue that supposedly pulled down Sensex yesterday a "manufactured crisis".

However, the initial show of confidence by the bulls could not be sustained and markets slipped on continued all-round selling pressure. This is striking as most of the Asian markets except for Indonesia and Malaysia ended the day with gains.

"Markets certainly look weak. Nobody can be certain that this is the bottom. It is likely that the Sensex may fall by another 300-400 points over the next few days. We cannot say that we were not prepared for this. In fact, technical analysts have been saying that the markets could go down to the 10,700 level," said Shahina Mukadam, Head of Research, IDBI Capital Markets.

Today, the indices graph oscillated between the black and the red till 12:58 pm, when the bears finally won and an avalanche of selling dragged the markets downward.

Amid choppiness and the negative bias, brokers began advising clients to square off their positions. By 2 pm, the market had only one direction "" downward.

Marking its worst week of trade so far, the Sensex ended the week lower by 11 per cent, having shed 1,347 points in five trading sessions. Over Rs 4.04 lakh crore of market capitalisation has been wiped out since Monday morning.

The price earnings ratio of the Sensex has now slipped from 21.58 to 19.42. In fact, since Wednesday last week, when the market hit the historic high, it has lost 1,677 points, eroding over Rs 4.31 lakh crore of investor wealth.

The reasons attributed to the fall in the markets are no different from the previous two days.

Though the CBDT circular on foreign institutional investors' (FIIs') taxation was clarified by the finance minister, other factors like weak Asian markets, low metal prices, margin pressure because of the losses the previous day, and continued worries about the US interest rates dominated the discussions of brokers.

In the absence of any strong positive cues, the markets are going to find it difficult to break out of this losing streak and post a strong rally. Recovery might not be immediate and future sessions will be fraught with volatility, brokers pointed out.

FIIs continued their selling spree. Domestic mutual funds, who, according to analysts, are sitting on a fair bit of cash, were not stepping into the market in a big way.

Fund houses were net buyers of only Rs 762 crore worth of equity on Thursday, while FIIs sold equity worth Rs 1,459 crore on Friday. Out of 2,529 traded stocks, 2,241 stocks declined and only 288 scrips advanced and 32 per cent or 806 stocks hit the lower limit of the circuit filter today.