Sensex slips 171 points to 9,086

Mounting fears about a dollar outflow on account of India millennium deposits and unwinding of positions in Reliance ahead of the December expiry in the absence of buying support induced a sharp fall in the markets today. The BSE Sensex fell 171 points or 1.85 per cent to end the day at 9086.

The market witnessed selling pressure throughout the day and heavy profit-taking was witnessed with domestic mutual funds on the selling side and no counter-forces on the buying side, dealer said. This resulted in the Sensex oscillating 212 points amidst high volatility. All sectoral indices also closed lower.

"Excessive open interest in the F&O segment (Nifty and individual stocks) continued to weigh the market down. The lack of clarity on the Reliance de-merger impact on the index continues to be the key sentiment dampener," said a Sharekhan executive.

The market breadth was overwhelmingly negative with only 478 stocks advancing on the Bombay Stock Exchange. A vast majority (1,954 stocks) declined and about 49 remained unchanged. Turnover figures were sharply lower as market attendance was weak with players going on year-end vacation.

Delivery volumes also fell to less than 50 per cent indicating a margin increase in speculative activity as institutional players largely took a break from the markets. The cash market turnover was lower by 20 per cent compared with Friday's and about 26 per cent compared with the December monthly average.

Market participants warn that stock prices can fall further due to temporary nervousness but underlying sentiments still remain bullish. The market should bounce back in the new year.

Amitabh Chakraborty, head-research, Brics PCG, said, apart from the Reliance and IMD issues, valuations had been stretched. Some more corrections may happen this week as the derivative series closes on Thursday. But after that, the markets are expected to bounce back.

Chakraborty saw the current level as an opportunity to invest as foreign inflows had not declined. Further, third quarter results are expected to be good for export-oriented companies, especially with the rupee weakening.