Sensex dips 200 points to close at 9,756.76

Stock prices continued to tumble on Wednesday and the benchmark indices closed at nearly four-month lows. Weakness in global markets and continued concerns of global liquidity amidst expectations of interest rate hikes in all leading economies enveloped the domestic markets.

The BSE Sensex lost 200.56 points to close at 9,756.76 and the NSE Nifty recorded a loss of 76.85 points to end the day at 2,860.45. The BSE Sensex had last seen 9,700 levels four months back on February 3, when it closed at 9,742.58.

The fall came about amid extreme volatility as global markets softened on concerns of US inflation and interest rates on the one side and domestic mutual funds faced redemption pressure on the other.

The major indices had earlier started the day in the positive, with the BSE Sensex managing to cross the 10,000-mark for a brief period.

However, with participants showing a lack of confidence, profit-booking set in at higher levels and the ride was completely downwards from that point. Some short-covering also saw the markets trying to recover opening losses, but this could not be sustained.

At its lowest level, the Sensex was down by nearly 450 points from the day's high, indicating continued volatility.

The markets managed to recover ground during the final trading hour as participants resorted to bottom fishing at lower levels, but closed in the red yet again.

The overall market breadth was totally in favour of declines, which outnumbered advances by a ratio of 12.4 to 1 on the BSE. The turnover on the BSE amounted to Rs 3539.45 crore while the NSE recorded a turnover of Rs 7767.72 crore in the cash segment and Rs 25341.59 crore in the derivatives segment.

The Nikkei average fell 1.88 per cent on Wednesday to book its lowest close since November 30 2005 as concerns of a possible slowdown in the US economy and its impact on Japan hit exporters such as Honda Motors.

Foreign institutional investors were net sellers to the tune of Rs 70.12 crore, slightly lower than the past week's average. The quick initial setback, smart recovery in the late afternoon and closure in the red with over a 200-point loss has been a trend in the recent few days.

Shashibhushan, head, western region and Karnataka, IL&FS Investsmart said, "The sudden fall in the early morning trade is due to the margin calls triggered in the early hours. The buying support by the institutional investors later in the day lifts up the market and the market barely manages to restrict the extent of losses."

The market sentiment has turned extremely weak as the BSE Sensex continued to fall for the third consecutive day, with a loss of over 200 points on each day.

"We are likely to see an easing of the decline as bottom fishing, especially by dividend yield funds, kicks off. This year, so far, dividends have been good, in keeping with better returns announced by corporates," Shashibhushan said.