Sensex dips 130 points on telecom decision

The Cabinet's decision to defer changes in the foreign investment limit in the telecommunications sector triggered massive stock sales across the board on Thursday.

In extremely volatile trade, the Bombay Stock Exchange (BSE) Sensex plunged 130.20 points (2.1 per cent) to close at 6,063.91.

Market sources said select index-based hedge funds started unloading after the Sensex crossed 6,240 in intra-day trades. But news of the Cabinet deliberations prompted all-out selling.

Sanjay Sinha, fund manager with UTI Mutual Fund said: "A lot of bullish positions were built up in telecom and banking stocks in the last few days. The Cabinet's decision to defer the increase (in FDI limits) in the telecom sector affected sentiment."

Bharti Tele-Ventures' stock fell 1.60 per cent to Rs 119.90. The stock had surged to a 52-week high of Rs 130 ahead of the Cabinet meeting.

Elsewhere, private sector bank stocks surged after the government hiked the FDI limit in private banks from 49 per cent to 74 per cent. The UTI Bank scrip soared 14.00 per cent to Rs 162.55 and the HDFC Bank stock was up 4.40 per cent to Rs 384.10.

Jayesh Shroff, a fund manager with BoB Mutual Fund said, "The market was already overbought, thus a correction was overdue."

Also, stop-loss selling in reaction to the first signs of a correction had a cascading effect. I think new foreign funds are using this fall as an opportunity to buy."

Thursday's decline was led by old economy stocks that had spearheaded the recent rally. Gujarat Ambuja Cements lost 4.00 per cent to Rs 313.55 on massive fund selling.

Reliance Industries, which has a weight of about 13.8 per cent in the Sensex, eased 3.40 per cent to Rs 576.90, off the day's high of Rs 603.25 in intra-day trades.

On the National Stock Exchange (NSE), the S&P CNX Nifty, too, shed 37.70 points (1.9 per cent), to close at 1,944.45. Losers outpaced gainers two to one in brisk trades.

Meanwhile, foreign funds sold Indian shares for a net $9.1 million on Tuesday, the first instance of net sales by FIIs this year.