Uncertainty weighs on see-saw Sensex
The temblor may have passed, but Dalal Street continued to reel under the impact of the aftershocks. Gainers-losers | Heard on street | Stocks to watch
By TNN |
MUMBAI: The temblor may have passed, but Dalal Street continued to reel under the impact of the aftershocks. As India lagged the recovery in key Asian markets on Thursday, tempers flared up at many brokerages as clients alleged misappropriation of margin money and even unauthorised sale of shares from demat accounts. Many brokers remained selective in taking orders from clients.
It is learnt that one of the exchanges allowed the shortfall in funds pay-in by brokers to be temporarily met through pledging of shares. However, this was done selectively only to some of the large brokers.
A recently-listed large brokerage reportedly took a big hit in its proprietary book, while speculation was rife that another high-profile retail broker had defaulted in his commitment and was trying to organise money. Franchisees of several brokerages in suburbs and smaller towns remained shut. Most brokerages are believed to have fulfilled their commitments to exchanges.
It is learnt that one of the exchanges allowed the shortfall in funds pay-in by brokers to be temporarily met through pledging of shares. However, this was done selectively only to some of the large brokers.
A recently-listed large brokerage reportedly took a big hit in its proprietary book, while speculation was rife that another high-profile retail broker had defaulted in his commitment and was trying to organise money. Franchisees of several brokerages in suburbs and smaller towns remained shut. Most brokerages are believed to have fulfilled their commitments to exchanges.
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However, some of the reputed names are said to be facing problems in recovering dues from their clients and several second-tier intermediaries were struggling with liquidity crunch.
Throughout the day, uncertainty kept the market edgy. Major indices opened on an upbeat note, with the 30-share Sensex touching an intra-day high of 18,185.10, a gain of close to 600 points over its previous close.
FIIs continued to be in retreat, pulling out a net Rs 2,254.93 crore from equities. Domestic institutions, on the other hand, net bought shares worth Rs 1,117.03 crore on Thursday. In a way, some of the state-owned institutions were subsidising the exit of FIIs.
Just when it looked like the tide had turned, the market began its slide around noon. Nervous investors dumped shares at higher levels, dragging down major indices by around 2% at the close of trading. The Sensex ended at 17,221.74, down 372.33 points over its previous close. The 50-share Nifty shed 3.3% to close at 5,033.45. Midcap and small cap shares continued to be in the line of fire, with the respective indices on the BSE shedding 3% and 4% respectively.
Most retail investors continued to square up their derivatives positions and holdings in second line stocks at a loss. But these investors were lucky, compared to many who have not yet been able to exit their positions. Trading in nearly 1,200 stocks on the BSE was frozen after there were only sellers.
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Traded turnover in NSE's futures and option segment remained below Rs 40,000 crore, as most brokers are said to be unable to muster cash to fund margin payments to exchanges. Interestingly, while FIIs were selling aggressively in the recent past, many foreign brokerages have been advising their clients to use the fall as a buying opportunity. In the last one week, the Sensex has shed nearly 2,500 points or close to 13%."Long-term investors should capitalise on this sharp correction," says Deutsche Bank in its latest India strategy report. "Despite the risk of further overshooting on the downside, rather than panic and go short/underweight at this stage, we think long-term investors should now increase their India exposure," it adds.
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