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Praveen Gurwani
The bear army, hammered into submission in the past few months by the relentless rise of the Sensex, on Monday found an unlikely hero in the Reserve Bank of India chairman YV Reddy. Mr Reddy’s move to tighten liquidity by raising the cash reserve ratio pummelled bank stocks on the day and knocked off another 3% off the Sensex.
Concerns that the RBI’s move to raise cash reserve ratio could hurt earnings of banks sparked a selling spree in those counters, engulfing the entire market by the end of trading.
The 30-share Sensex plunged 538 points in the intra-day trading, before settling at 13,399.43, down 400.06 points. The BSE Bankex was the worst performer among sectoral indices, shedding 463.96 points or 6.4% to close at 6749.78. The 50-share Nifty ended at 3849.50, down 112.50 points over the previous close. In the last couple of sessions, bothe Sensex and Nifty have shed 4%.
“I do not see the correction lasting beyond a couple of days; the market is still flush with funds,” said Devesh Kumar, head of equities, ICICI Securities.
He agreed concerns over valuations remained, but added, “The bet is on growth and not as much on valuations.” India was the worst performer among key Asian markets on Monday, with Singapore, Hong Kong and Japanese markets rising around 1% each. “The steep fall has not come as a surprise, since most of the banking stocks were heavily overbought,” said Ketan Dedhia, director, Nalanda Securities.
Among frontline banking shares that faced investor fury, SBI fell over 8% to close at Rs 1,242.75, ICICI Bank fell around 7% to Rs 819.40, and HDFC Bank shed 4.7% to close at Rs 1,034.
Among the non-banking stocks, Tata Steel was a major loser. The stock shed over 6% to close at Rs 453.40 after CSN, its Brazilian competitor CSN bid 515 pence a share for Anglo-Dutch steel company Corus Steel, hours after Tata Steel raised its bid to 500 pence per share from 455 pence.
Brokers feel the stock could take a further knock if the bidding war continues with CSN. All the 30 stocks in the Sensex and 50 shares in the Nifty closed in the red. But shares of IT services companies fell to a lesser extent, compared with the rest of the market. The fall in indices would have been more severe, but for Infosys and ONGC, which ended with small losses.
:SugarwareZ-064: