The Hindu Business Line : Sensex sheds 306 points as market turns bearish

Margin move
The SEBI-initiated move to raise equity exposure margins by 50 per cent from April 17 forced foreign funds to liquidate their positions.
After a long time FIIs have turned net sellers in three consecutive trading sessions.
Among the major losers were L&T, Infosys and TCS.
Rupee falls on sustained buying by oil importers, RBI.

Mumbai , April 12

Foreign funds liquidating their holdings in the wake of a SEBI-initiated move to fix higher margins from next week sent the stock market to its biggest single day fall since last September.

Rising global oil prices and profit booking by domestic investors also contributed to Wednesday's bearish mood, dealers said.

The benchmark BSE-30 Sensex dropped 306.82 points (2.63 per cent) to 11,355.73 after local and foreign funds chose to book profits in a market which had gained 27 per cent this calendar. The NSE's Nifty index lost 98.45 points (2.83 per cent) to 3380. Nearly 60 per cent of stocks ended lower.

Stocks of all major sectors including technology, FMCG and banking declined in the selling spree. "FIIs have been selling heavily over the last two sessions. Tomorrow may be subdued," Mr Ketan Dedhia of Nalanda Securities, said.

Despite proposals for bonus shares by tech majors Infosys and Satyam, the mood was bearish after lacklustre quarterly results by mid-cap IT companies such as iGate and MphasiS.

The NSE's IT index CNX IT fell by 175.20 points (4.02 per cent) to 4180. Dealers said Infosys results on Friday would set the mood for next week's trading. The SEBI-initiated move to raise equity exposure margins by 50 per cent to 7.5 per cent from April 17 forced foreign funds to liquidate their positions, a dealer said.

As per the circular issued by the NSE, all open positions on or from April 17 will carry higher margins.

"Brokers who have taken positions on behalf of their clients will have to provide for the margins themselves, forcing them to liquidate the open positions," he said.

FIIs, which made net investment of over $4.2 billion this calendar, have sold about $200 million of stocks in the last two trading sessions. "If you assume that the FIIs were net sellers on Wednesday, then this would be after a long-time that they have turned net sellers in three consecutive trading sessions on the Indian stock market," an official with a domestic mutual fund said.

Mutual funds, which have been net buyers this month, had turned net sellers for over Rs 200 crore on Monday.

Among Wednesday's major losers were L&T (down Rs 96.25 to Rs 2557.65), Infosys (down Rs 111.95 to Rs 3075.30) and TCS (down Rs 112.7 to Rs 1783.10).

Rupee slumps

The rupee slumped against the greenback due to sustained dollar buying by oil importers as well as the RBI.

The steep fall in the equity markets also had its impact on the rupee in the local forex market. The domestic currency shed more than 30 paise to close at 45.19, down from the 44.8350/8450 of Monday.

According to a money market dealer, oil companies began buying dollars as the price of crude spiralled to $70 per barrel.

Contributing further to the rupee's fall was the 306-point decline in the BSE Sensex that drove the currency below the psychological level of 45.

"Once 45 was breached, there was panic buying by banks to cover their short positions," the chief forex dealer at a private bank said.

"The central bank was buying dollars despite the weakening rupee and stronger liquidity, for building up forex reserves," he added.

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