Sensex dips below 17,000 on global cues, talk of check on FII flows

Sensex dips below 17,000 on global cues, talk of check on FII flows
The Hindu Business Line, November 27, 2009, Page 1

Chinese, European markets weak; heavy selling in pivotals.

Our Bureau, Mumbai

Market indices fell sharply due to heavy selling pressure as signs of weakness in the international financial markets surfaced again. The Sensex slipped below the 17,000-mark on Thursday.

The benchmark index tanked 2 per cent, shedding over 340 points. It touched the day’s high at 17,202, and a low of 16,808 before closing at 16,854. The broader Nifty too fell over 2 per cent, but managed to keep its head above the 5,000-mark, to close at 5,005.

Concerns over debt repayment delays by a Dubai government-owned investment company made global markets nervous.

“This also led to selling pressure in India,” said Mr Gopal Agrawal, Senior Fund Manager, Mirae Asset AMC.

Also, there was some amount of profit booking as investors unwound positions due to the expiry of futures and options today, he said.

P-notes check

Brokers said the selling pressure was due to various reasons, including news that the Government has called for checking Foreign Institutional Investment flows through Participatory-Notes.

“A lot of money comes into Indian stocks from free and unregulated markets through the P-Note route,” said a broker.

On Thursday, FIIS were net sellers for Rs 70 crore; domestic institutions were net buyers of equity for Rs 150 crore, according to data on the NSE.

FII activity has been lacklustre over the last few trading sessions, said brokers.

Brokers said that Indian stocks also slid owing to negative cues from the Chinese market where banking stocks fell sharply. Asian markets too were weak; the Hang Seng was down 1.75 per cent, Nikkei fell by 0.62 per cent.

Concerns arose globally after a Government-owned investment company in Dubai asked for six more months for repaying its debts. Dubai World is asking creditors if it can postpone its forthcoming payments until May next year.

European markets were trading weak with the key benchmark indices in the UK, France and Germany down in the range of 1.86 per cent and 2.05 per cent.

There was heavy selling in the index heavyweights including Reliance Industries, which went ex-bonus today, said another broker.

From the announcement date of the bonus to the record date there had been heavy buying in RIL, he added. In fact the stock had moved up during the past couple of days due to this, he added.

Major losers

The major losers on the BSE included Reliance Industries (4.5 per cent)post bonus, ICICI Bank (3.47 per cent), Tata Steel (3.34 per cent), Mahindra & Mahindra (3.10 per cent), SBI (3.01 per cent).

All this negative news means that confidence is dwindling as even the Asian countries are in trouble, said Mr Vishwas Agarwal, an independent analyst. Mutual funds were not very active, but some selling was noticed due to redemption fears, said a broker.

They were exiting capital goods, engineering and real estate stocks and increasing their exposure to energy, pharma, IT and financial sector stocks, said Mr Agrawal.

Retail participation

Retail investors on the other hand were either not participating in the markets or were booking losses. There was almost no retail activity, said a broker.

“I did not participate in the market today as it was F&O expiry,” said Mr Ajay Patel, a retail investor. “I would rather wait for the markets to set a trend in the coming days and then decide on my investments,” he added.