Financial Daily from THE HINDU group of publications
Wednesday, May 12, 2004
Markets - Stock Markets
Sensex sinks 229 on political worries
Mumbai , May 11
THE results of the Andhra Pradesh Assembly elections ripped through the financial markets on Tuesday, toppling the stock indices to the deepest intra-day fall in four years.
Brokers, analysts and other market participants were expecting the day to be bearish on the bourses, but the pace and depth of the fall in the indices left them gasping.
The Sensex opened low and stayed in the red throughout the day. At the close of trading, the benchmark index lost over four per cent, 229.94 points, ending at 5309. The S&P CNX Nifty lost over 69 points to close the day at 1699, wiping out 3.94 per cent.
While selling pressures were high across the board, PSU and banking stocks suffered severe battering. This reflects the market sentiment that a non-NDA Government at the Centre could significantly influence the pace of reforms and disinvestments.
All the Sensex heavyweights, including Reliance, Tata Motors, ITC and L&T, were hammered down. Most mid-cap stocks took a drubbing as well. Volumes in both BSE and NSE continued to be low during the day.
Tuesday's turn of events has left the market bearish, at least in the short to mid term.
While today was an entry point to the market, the advice seems not to be in favour of a full plunge.
There would be lots of entry opportunities in the near future, said Mr Sanjay Bhasin, Chief Executive Officer, JM Morgan Stanley Fixed Income Securities.
Brokers say that they were expecting markets to be sluggish today and the results of the Andhra Pradesh election were also in a way anticipated. "The intensity of the TDP loss was the turning factor. No one expected it to be by such a high margin. The market is worried that this is a clear indication of a hung Parliament at the Centre," said Mr Sathish Menon, Chief Operating Officer, Geojit Securities Ltd.
"The nearly 4.5 per cent loss in the market was unpleasant and unanticipated. Whichever party forms the new Government, they would have to continue with the reforms process, but the pace would be questionable," said Mr Paras Adenwala, Head - Equities, Birla Sun Life Mutual Fund.
Asian markets, pessimistic on Monday, have recovered today. But market watchers feel that this does not mean that the correction in global markets is over. "From what I understand, hedge funds are reducing exposure to emerging markets. This would have an impact in the markets, even after post-election clarity," Mr Adenwala said.
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