Financial Daily from THE HINDU group of publications
Tuesday, May 18, 2004
Columns - Sensor
Zee Tele, Tata Info among 17 bravehearts
CARNAGE, bloodbath or mayhem, even these words would fail to express the magnitude of damage that was done to the stock markets on Monday. All it took was a few sweeping stern statements from the Communist Party leaders on economic policies to erode close to one-fourth of the market capitalisation over the last two trading sessions.
Markets witnessed the worst-ever knee-jerk reaction on Monday, losing 17 per cent in a single day in just 10 minutes. For the first time in the country's capital market history, trading was suspended twice during the day as indices breached the circuit filters. Unwinding of positions in the Futures & Options market and the triggering of margin calls further accelerated the downfall. Consistent selling by FIIs over the past nine days, too, dampened sentiment.
The BSE Sensex shed 11 per cent or 564.71 points to close at the 4505-mark. It sunk to an intra-day low of 4227 points.
There were concerns that there could be settlement problems. During the two-hour break, the RBI said it was ready to provide liquidity to banks for meeting all their payment obligations, including any intra-day requirements. This provided some relief to market players.
When trading resumed after a two-hour break, there was a smart upmove in certain stocks. Trading volumes, however, were very low. After about 15 minutes, the volumes did start rising but the markets continued to fall as investors who could not offload earlier started exiting in panic.
Though much of the panic reaction could be due to country-specific developments, overall bearishness in most emerging markets could have worsened the situation.
In the carnage that it was, only 17 stocks braved to gain. Among them were Zee Telefilms, India Hume Pipes, Snowcem India, Tata Infomedia, PNB Gilts, Classic Diamonds, Pearl Polymers, Kandwala Securities and Rallis. India Hume Pipe managed to stay above Friday's close throughout the day.
The top 10 losers lost in excess of 20 per cent. They were Reliance Energy, Oriental Bank, IPCL, HTMT, Gail, Bank of Baroda, NIIT, BHEL, HDFC Bank and Tata Power. The loss was despite the sharp recovery in these stocks from their respective intra-day lows.
The magnitude of loss in the Nifty and Sensex were much higher (over 20 per cent) than that in the stocks in the broader indices. For instance, the top 10 losers in the Junior Nifty, barring Bank of Baroda, lost below 20 per cent while that in the Nifty lost in excess of 20 per cent.
For all the hullabaloo about divestment, the primary divestment candidates, HPCL and BPCL, lost just 5 per cent and 3.7 per cent, respectively. This could only indicate that the political uncertainty and the divestment could only be an excuse to exit the markets that has been on a roll over the last year.
The markets refused to take note of good news that was flowing in for specific stocks and continued to batter them. The Balrampur Chini stock declined 11.6 per cent despite declaring a dividend of Rs 10 per share. Kotak Mahindra Bank was yet another stock that declined 14.6 per cent to Rs 305 despite the company announcing that it is to consider issue of bonus shares.
Few stocks that declined less than 5 per cent were Bharti, Biocon, Ashok Leyland, Bharat Electronics, Wockhard Pharma, Carborundum Universal, EIH, E-Serve International and Suven Life Sciences. Carborundum Universal has recommended a dividend of 125 per cent. It has also recommended splitting its shares of Rs 10 each into five shares of Rs 2 each. This could have contained the losses in the stock.
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