Reform blues make markets see red

Sensex dips 330 points, wipes out Rs 1 trillion.

The markets on Friday priced out the premium for public sector undertaking (PSU) divestment built into market valuations, knocking off Rs 1,15,000 crore (Rs 1.15 trillion) in market capitalisation, the largest single-day fall.

With the Left parties opposed to the disinvestment process and some sections even talking of scrapping the disinvestment ministry, the Bombay Stock Exchange (BSE) PSU index nosedived 14.41 per cent yesterday, dragging down the BSE Sensex 355 points in the largest ever intra-day fall to the day's low of 5,043.99, which was also a six-month low.

But at close, the Sensex was 6.10 per cent lower at 5,069.87, 330 points lower than Thursday's close.

The sharp fall in the indices sent the markets into a tailspin, with the National Stock Exchange reportedly switching off more than 100 terminals on the broker's failure to meet margin calls.

When contacted, an NSE official spokesperson said, "Whenever the market is extremely volatile, there is disablement of terminals which is very normal. But by the end of the trading session, there were less than five terminals that were switched off."

The same selling wave swept across sectors as diverse as banks and consumer durables, with losers outpacing gainers 9:1.

Traded volumes were higher, with the cash market turnover at Rs 3,288.12 crore on the BSE and Rs 6,968.57 crore on the National Stock Exchange (NSE) as investors seemed to be selling at all levels, worried stiff that the incoming government's stance on key issue such as privatisation would hit foreign investment.

The BSE Bankex plummeted 10.59 per cent, the capital goods index lost 9.23 per cent and the consumer durables index was down 6.40 per cent. All the 30 scrips in the Sensex basket closed with losses.

The State bank of India scrip was the largest loser in the Sensex basket, falling 14.77 per cent to Rs 514.85, followed by MTNL, down 13.1 per cent to Rs 115.45, Hindustan Petroleum fell 12.81 per cent to Rs 331.35 and ONGC lost 12.47 per cent to Rs 722.55.

Sunil Shah, managing director, HDFC Securities, said, "Major Foreign Institutional Investors selling dragged the markets down yesterday. The markets seem to have discounted the PSU divestment valuations built in, in the last few months on the hope that some major PSUs will be divested."

Foreign Institutional Investors (FIIs) were net sellers on Thursday at Rs 604.40 crore, the highest ever in a single day.

Other Sensex scrips falling more than 10 per cent included BHEL, which fell 11.09 per cent to Rs 499.90, Tata Power lost 10.51 per cent to Rs 323.25 and Bharti Tele-Ventures lost 10.25 per cent to Rs 143.60.

Heavyweight Reliance Industries fell 6.77 per cent to Rs 476.80 and ITC lost 3.48 per cent to Rs 914.50. BPCL fell 13 per cent to Rs 356.40, while Shipping Corporation of India lost 17.68 per cent to Rs 86.35.

The Punjab National Bank scrip plunged 18.22 per cent to Rs 263.90 and ICICI Bank fell 6.95 per cent to Rs 265. But tech companies bucked the tide somewhat, with the BSE IT index down 3.17 per cent.

The Wipro stock fell 3.62 per cent to Rs 1545.70, Infosys Technologies fell 2.26 per cent to Rs 5,081.80, and Satyam Computer lost 0.18 per cent to Rs 311.65.

Nandan Chakraborty, head of research at Enam Securities said, "FIIs were big sellers today, with PSU, energy and banking scrips coming in for special punishment. Volatility will continue till it is clear as to who will handle the key portfolios in the cabinet."

He added that the common minimum programme of the new coalition government will be crucial for further indications.

Most market players said the Left is unlikely to pursue its own individual agenda but will in all likelihood put roadblocks in the pace of reforms.

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Crash on a Left turn

• All 30 Sensex scrips lose.
• Losers swamp gainers 9 to 1.
• Rupee closes at a 4-month low of 45.62/63.
• Bond yields jump; 10-year paper yield at 5.25%, up seven basis points.
• Discount on forward dollars deepens.
• 165 stocks hit 3-month lows.
• 28 scrips plumb one-year low.
• PSUs lose over Rs 55,500 crore in market capitalisation.
• Government loses Rs 37,000 crore in PSU valuations.
• Highest FII selling in a single day.
• FII net sales in May total Rs 2,148 crore; have been sellers for eight consecutive sessions.