The Bombay Stock Exchange (BSE) sensitive index yesterday dipped below the psychological level of 3400 points on heavy selling pressure as the pre-budget blues caught up with the key stocks, particularly those of the multinational corporations (MNCs).
The Sensex closed at 3358.47, sliding 81.02 points over the previous close of 3439.49. The NSE-50 index also dipped sharply by 26 points to close at 964.75 points against a previous close of 991.55 points.
There was an all-round downtrend at the major bourses yesterday and the selling pressure was particularly evident in all Foreign Exchange Regulation Act (Fera) companies. The Indian global depository receipt (GDR) markets were also down by three per cent, with the Skindia GDR index dipping to 67.69 against a previous level of 70.03.
Complicating matters further for the MNCs were the royalty fears, with Rhone-Poulenc and Smithkline Beecham, the duo caught in a royalty payment fix to their respective parent companies, leading the pack of the falling Fera stocks.
The royalty issue made such a severe dent in the market that it cascaded to scrips like HLL, Colgate-Palmolive and even Ponds, a perpetual favourite among the MNC scrips.
FII trading activity remained dull, with FII turnoverson the BSE at just Rs 27 crore. Analysts said that royalty outgoes would be true of 40 per cent Fera companies rather than companies where the parent firm has got a 51 per cent shareholding. Another analyst begged to differ, Nestle holds 51 per cent in its Indian subsidiary, but nearly half the net profit made in India goes out as royalty fees.
Marketmen were particularly jittery of the fact that the markets have dipped sharply just prior to the budget, scheduled to be presented on Friday, creating greater uncertainty over how the markets would behave after the budget was announced.
