Sensex sheds 306 pts, on crash course

Fourth highest decline; Nifty loses 2.83%.

The much awaited correction in the market finally happened as the Sensex tumbled by 306 points or 2.63 per cent on Wednesday to close just above 11,355 points. Losers beat gainers nearly two to one.

In absolute terms, Wednesday's was the fourth highest decline in the history of the Sensex and the biggest in the last two years. The 50-stock Nifty, too, broke many support levels and lost nearly 2.83 per cent to close at 3,380 points.

Wednesday's fall began with technology stocks like TCS, Wipro and Satyam sliding. These stocks received a hammering overnight in the US market. But the 30-stock index held on to Monday's closing levels of around 11,660 points for the first two hours of trade. An early rally in the metal stocks, too, helped the index keep its head above water till noon.

Brokers attributed the fall to heavy selling by foreign funds which had, since Friday, been sellers in the spot markets and the derivative segments.

"Foreign funds seem to be booking profits after being on the buying side for a fairly long time," said a Mumbai-based broker.

The foreign institutional investors had sold off equities worth Rs 950 crore over the past two trading days, starting Friday, when the Sensex first approached the 12,000-point mark.

The foreign funds have been net sellers also in the futures market where they have sold both index and stock futures worth nearly Rs 5,000 crore over the last four trading days. Indicating a bearish mood, the net-selling position increased in extent from nearly Rs 600 crore on last Wednesday to nearly Rs 2,000 crore on Monday.

Adding weight to the profit-booking argument, the brunt of Wednesday's post-lunch sell-off was borne by some of the Sensex stocks which had also seen the biggest run-ups over the past three months.

While the technology stocks slid consistently since trading began, among prominent Sensex losers were Maruti, Cipla and Grasim Industries, all of which had outrun the constituent index in the last three months.

While the biggest casualty on the Bombay Stock Exchange's 30-stock benchmark index was TCS, which took a knock of just under 6 per cent, all the other stocks ended in the red too.

Infosys dropped 3.5 per cent to Rs 3,075.30, Satyam shed 4.5 per cent to Rs 798.50 and Wipro lost 3.7 per cent to Rs 515.85. Other major losers were Maruti and Tata Motors, down 4.9 per cent each, Cipla 5.2 per cent and Grasim, down 4.8 per cent.

Associated Cement Companies slipped 0.83 per cent to Rs 911.25, after rising as much as 3.6 per cent as quarterly net profit rose 42 per cent. Apollo Tyres gained 0.5 per cent to Rs 329.90 but later eased to Rs 338, up 3 per cent. MphasiS BFL slipped 5.1 per cent to Rs 203.20 and Honda shed 4.5 per cent to Rs 830.25.

Besides cement and metal stocks, which had been gaining during the first two hours of trading, only Dr Reddy's, Bharti, Reliance and NTPC managed to limit their losses to under 1 per cent.

Among the sectors, information technology was the biggest loser, followed closely by automobiles, pharmaceuticals, FMCG and capital goods stocks.

While the metal index on the BSE slid by a little more than a per cent, the BSE oil and gas index turned out to be the one which took the weakest knock, 0.77 per cent.

On the broader 50-stock Nifty, the top losers were joined by VSNL, which lost 7 per cent after a Trai report found the company losing Internet subscribers, and by Jet Airways and MTNL.

MTNL had been climbing in the last few weeks. Only one stock on the Nifty, BPCL, ended with no losses and was up by around 1 per cent.

Wednesday's toll was the highest among the large-caps and the index constituents, with the market breadth improving considerably.

The bias was also visible on the BSE's small-cap and mid-cap indices, both of which did better than other indices with narrower bases.

Not many experts were willing to comment on the market's future movements, with most fund-managers and analysts trying to absorb the fall on Wednesday.