Uneasy centre to keep market on the edge

MUMBAI: Political turmoil has caused great volatility in the stock market, according to analysts. On Monday, the BSE 30-share sensex witnessed a wild swing of 793 points, before ending at 4,505, down 565 points in the second-biggest single day fall.
Tuesday was as bad, although movement was in a different direction.
The sensex witnessed intra-day volatility of 402 points, before settling at 4,877, up 372 points or 8.3%. On May 14, the day after the elections were announced, the sensex had lost 330 points, fluctuating 372 points on the day. The market had remained fairly volatile on May 13. After a 356-point swing, it ended 41 points higher at 5,399.
Sources fear that the market will continue to be highly volatile until a clear political picture emerges. They don’t see any major upward rise in the short term from the sensex’s current level. “The market had been highly volatile amid political worries. Foreign institutional investors (FII) and hedge funds have been selling in the market due to concerns over irresponsible statements from politicians,� said Alok Churiwala of Churiwala Securities, a Mumbai-based broking firm.
“Fund selling, coupled with margin selling, dragged down the market on Monday. However, buying support from domestic institutions helped it recoup a substantial part of intra-day loss,� he added.
Another broker said serious concerns over political developments had prompted players to cut down their positions in the market. This, combined with a good amount of short covering, led to volatility, he explained, adding that “people had leveraged large positions on expectations that were not fulfilled�.
The market has been witnessing intra-day volatility of more than 100 points ever since the start of the Lok Sabha elections.
Exit polls announced after every phase of the elections last month contributed to the volatility. Brokers said the market was concerned that the reform process would receive a major setback if the Congress-led alliance formed the government with support from the Left. These fears caused the high volatility in shares, they said.