FII intra-day cash segment sales the biggest ever Leveraged retail players cop it, aggravate fall l Market capitalisation loss at $169 billion Open interest falls 12% l Sebi pushed brokers to clear dues by 6.30 pm Monday That could spur fresh closure of positions
MUMBAI: The tearing bronze bull in front of Jeejeebhoy Towers, better known as the Bombay Stock Exchange, hasn’t been a good omen —- at least yet.
In the six sessions since it was mortared to symbolise India’s capital market boom, the Sensex has not closed in the green even once. In fact, it has shed nearly 4000 points.
Pure bull or poor bull? Extremely bearish, actually.
Weak global markets, rising leveraged of retail investors even as foreign funds sold like mad are popular reasons proffered for Monday’s mayhem, but the current in the fall has shocked —- and electrocuted —investors aplenty.
FIIs sold nearly Rs 3,300 crore worth shares in the cash segment on Monday according to provisional National Stock Exchange data. That’s the most they have sold in a day since making an entry in 1991.
In four days, they jettisoned futures contracts worth Rs 6,000 crores and equities worth Rs 9,100 crore in cash.
As a result, the Sensex plunged to its biggest fall in number terms ever —- losing 1408 points to end Monday at 17605.
Still, that’s only the 8th largest plunge in percentage terms, but the bloodloss this time is massive.
Blame it on leverage.
FIIs have also been heavy arbitraging by shorting futures and buying equities in cash, heaving in huge dollops of money in the process.
“Weaker hearts would have bid adieu on Monday,” said Pankaj Valia, a Mumbai-based advisor to high net-worth individuals.
“The Nifty was swinging up 50 points a moment, and down 90 points the next. This is unprecedented,” he said.
He said Monday’s events cannot be attributed to one single cause.
“A number of things compounded. Worldwide weakness was the prime reason. We have not seen China fall 5% in a long, long time,” Valia says. That, players say, is among the most disturbing signals as China and India have been holding fort for some time now amid the global sea of red.
Deepak Mohoni, CEO, Trendwatchindia.com, says once a bear market is entered, things happen very fast.
“When bubbles burst, markets don’t come down gently.”
Mohoni spotted the latest bubble when most people didn’t —- just two weeks ago, in these columns.
He says things have just begun. “We could see a fall of 5000-6000 points. This is just the beginning. European markets are 4-5% down. That’s big for them. If we draw a parallel to the May 2006 fall, when the markets corrected similarly, the global economy was not this bad. In the US the bond insurers are facing troubles.
Their ratings are going down. There are lot of problems with the financial system.”
Global equity markets have been very volatile as weak economic data out of US along
with writeoffs from financial majors.
These developments have exacerbated investor concerns about the slowing economic growth in developed countries and the impact of the sub prime related losses, which could lead to more trouble for the market, said Sukumar Rajah of Franklin Templeton.
“Increased safe-haven buying will result in short-term foreign investors pulling out of emerging markets. In India, equity supply is going to increase due to a slew of IPOs impacting the secondary market.
Over the near term, any concerted effort by governments and central banks in developed economies (read stimulus packages and rate cuts), could boost sentiment,” Rajah said.
However, long-term relief is not on the horizon.
Mohoni said US Fed chief Bernanke and central bank governors who have been very responsive to the markets could do something drastic.
“But that could only be temporary relief,” he said —- as do voices from Wall St.
The BSE halted trade twice —- at 2.49 pm and 2.52 pm —- because its circuit switch was programmed to halt trade when the Sensex fell 10%, whereas per Sebi rules, it should be at 15% after 2.30 pm.
MUMBAI: The tearing bronze bull in front of Jeejeebhoy Towers, better known as the Bombay Stock Exchange, hasn’t been a good omen —- at least yet.
In the six sessions since it was mortared to symbolise India’s capital market boom, the Sensex has not closed in the green even once. In fact, it has shed nearly 4000 points.
Pure bull or poor bull? Extremely bearish, actually.
Weak global markets, rising leveraged of retail investors even as foreign funds sold like mad are popular reasons proffered for Monday’s mayhem, but the current in the fall has shocked —- and electrocuted —investors aplenty.
FIIs sold nearly Rs 3,300 crore worth shares in the cash segment on Monday according to provisional National Stock Exchange data. That’s the most they have sold in a day since making an entry in 1991.
In four days, they jettisoned futures contracts worth Rs 6,000 crores and equities worth Rs 9,100 crore in cash.
As a result, the Sensex plunged to its biggest fall in number terms ever —- losing 1408 points to end Monday at 17605.
Still, that’s only the 8th largest plunge in percentage terms, but the bloodloss this time is massive.
Blame it on leverage.
FIIs have also been heavy arbitraging by shorting futures and buying equities in cash, heaving in huge dollops of money in the process.
“Weaker hearts would have bid adieu on Monday,” said Pankaj Valia, a Mumbai-based advisor to high net-worth individuals.
“The Nifty was swinging up 50 points a moment, and down 90 points the next. This is unprecedented,” he said.
He said Monday’s events cannot be attributed to one single cause.
“A number of things compounded. Worldwide weakness was the prime reason. We have not seen China fall 5% in a long, long time,” Valia says. That, players say, is among the most disturbing signals as China and India have been holding fort for some time now amid the global sea of red.
Deepak Mohoni, CEO, Trendwatchindia.com, says once a bear market is entered, things happen very fast.
“When bubbles burst, markets don’t come down gently.”
Mohoni spotted the latest bubble when most people didn’t —- just two weeks ago, in these columns.
He says things have just begun. “We could see a fall of 5000-6000 points. This is just the beginning. European markets are 4-5% down. That’s big for them. If we draw a parallel to the May 2006 fall, when the markets corrected similarly, the global economy was not this bad. In the US the bond insurers are facing troubles.
Their ratings are going down. There are lot of problems with the financial system.”
Global equity markets have been very volatile as weak economic data out of US along
with writeoffs from financial majors.
These developments have exacerbated investor concerns about the slowing economic growth in developed countries and the impact of the sub prime related losses, which could lead to more trouble for the market, said Sukumar Rajah of Franklin Templeton.
“Increased safe-haven buying will result in short-term foreign investors pulling out of emerging markets. In India, equity supply is going to increase due to a slew of IPOs impacting the secondary market.
Over the near term, any concerted effort by governments and central banks in developed economies (read stimulus packages and rate cuts), could boost sentiment,” Rajah said.
However, long-term relief is not on the horizon.
Mohoni said US Fed chief Bernanke and central bank governors who have been very responsive to the markets could do something drastic.
“But that could only be temporary relief,” he said —- as do voices from Wall St.
The BSE halted trade twice —- at 2.49 pm and 2.52 pm —- because its circuit switch was programmed to halt trade when the Sensex fell 10%, whereas per Sebi rules, it should be at 15% after 2.30 pm.