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Sensex crashes 192 points on nervous selling

By Our Special Correspondent

MUMBAI, JAN. 5. Stock markets crashed today after touching the all time high on the first trading day of the New Year. The Bombay Stock Exchange 30-share sensitive index (Sensex) plunged by over 192 points.

After touching an intra-day low of 6334.74 points, the Sensex ended at 6458.84, losing 192.17 points, the biggest intra-day fall since May 17. The NSE Nifty also lost 71.55 points to end at 2032.20. The breadth remained extremely negative with 1970 losers and 411 gainers.

"The market had gone up sharply and I think this correction will make it more healthy", said Motilal Oswal, Managing Director of Motilal Oswal Securities. The fall can be attributed to four broad reasons, according to Ved Prakash Chaturvedi, Managing Director, Tata Mutual Fund. First, the outstanding positions in the futures and options (F&O) segment was high at Rs. 15,000 crores, which needed to get reduced. Second, there was a weakening of the rupee against the dollar. In recent times, a strengthening rupee was a key driver of FII flows into India due to currency arbitrage opportunities in the domestic market and hence this acted as a negative trigger for the market.

Third, the absence of fresh inflows from FIIs in the last few trading sessions, which can be due to squaring up of their positions in the New Year. This also acted as a disincentive for the market, which has seen a liquidity-based rally on the back of FII purchases in recent times. And four, the market looked overheated and valuations seemed to be high on absolute and relative terms. This made the players nervous about the state of the market.

The crash in the U.S. markets yesterday only added to their feeling of nervousness.

The mood in the market turned extremely bearish, as investors were worried about a slowdown in the global economy. A sharp fall in metal prices on the London Metals Exchange on fears of a slowdown in Chinese demand also weighed heavily on the market.

Tech stocks lead fall

The major fall in technology stocks was due to a weak trend in the U.S. tech index, Nasdaq, influencing trading at the opening in Asian markets. Metal, auto, bank, PSU and IT sectors bore the brunt of selling and showed hefty losses.

The downtrend was led by Infosys, Reliance Group companies, Hindalco, ONGC, Ranbaxy, Glaxo, Hero Honda and Tata Motors as brokers and major funds indulged in taking profits at the prevailing higher levels. Operators and retail investors seemed to have turned heavy sellers in blue chip counters to take benefits of the prevailing higher price levels.

The BSE PSU index plunged 202 points or 4.5 per cent to 4316.63. The BSE Tech index lost 54.67 points or 3.11 per cent to 1702.13 and the BSE Bankex lost 165.79 points or 4.39 per cent to end at 3607.35.

Infosys lost 1.75 per cent to end at Rs. 2,051.85. Wipro was down 5.68 per cent at Rs 706.20, and Satyam Computer ended lower by 5.23 per cent at Rs. 389.80.

Indian Overseas Bank were down 5.05 per cent at Rs. 75.25, Canara Bank 8.99 per cent at Rs. 206, Dena Bank 7.86 per cent at Rs. 38.10, Bank of Maharashtra 7.38 per cent at Rs. 37, Union Bank of India 5.51 per cent at Rs. 108,Vijaya Bank 7.8 per cent at Rs. 67.80 and Bank of India 7.21 per cent at Rs. 92 on profit taking after the recent gains. The cement sector, however, remained in the limelight on reports of a surge in despatches during December. Key cement counters such as ACC, Gujarat Ambuja and Grasim were quoted higher on sustained buying interest.

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