Budget euphoria evaporates, Sensex crashes 176 pts

Budget euphoria evaporates, Sensex crashes 176 pts
ENS ECONOMIC BUREAU

MUMBAI, MAR 2: The euphoria over Yashwant Sinha's budget has evaporated in less than two days. With technology stocks taking a dive across the world, Indian stock markets crashed like nine pins on Friday as foreign institutional investors (FIIs) went on a `sell' drive, thereby bringing the Bombay Stock Exchange Sensex back to the pre-budget level. The benchmark Sensex closed at 4,093 points with a whopping loss of 176 points while the National Stock Exchange Nifty Index closed lower by 52 points at 1,306 points.

Investors wealth, or market capitalisation -- the total market value of all listed shares -- plunged by Rs 35,171 crore to Rs 681,236 crore on the Bombay Stock Exchange. Sensex had shot up by an equal margin -- 177 points -- on Wednesday following the market friendly measures in the budget.

Foreign funds sold lock, stock, and barrel in technology stocks and took an opportunity to exit at higher levels. Starting on a strongly optimistic note during the early trades, Sensex touched the day's high of 4341.67 points at early stages, but only to turn weak and crashed in an unprecedented manner in the wake of fresh selling spree by FIIs which supposedly were getting technology stocks at cheaper prices on the US market.

Says Pawan Dharnidarka, a BSE member: ``There wre string rumours that a big bull is in trouble and he is liquidating stocks to get out of the present crisis... FIIs were also selling heaviliy.'' Brokers say that a big foreign institutional house is selling these stocks to reduce its exposure to Asia.

Reflecting the meltdown, Sensex crashed by 176.49 points or 4.13 per cent to close at 4095.16 as against yesterday's close of 4271.65. The BSE-100 Index also nosedived by 117.30 points to 2021.59 from previous close of 2138.89.

Discounting all positive factors including favourable budget proposals and signs to pursue reforms aggresively by the government, FIIs resorted to heavy sales following profit warnings by Oracle and slowdown in the US economy. FIIs who had made sizeable net sales on Wednesday, were consistent and heavy sellers since then mainly in shares of Infosys Tech, Satyam Computer and Zee Telefilms.

The stock movers seem to have found it safer to square off their positions. The sell-off had a cascading effect on old economy shares too. Many tech shares touched their 52-week lows, sending panic across the market. Infosys (down by 12 per cent), Satyam (down 16 per cent), Global Tele (down 16 per cent), Zee (down 16 per cent), Polaris (16 per cent), SSI (16 per cent), TV 18 (9 per cent), VisualSoft (down 16 per cent), Sterlite Optical (down 8 per cent), HFCL, Silverline (15.7 per cent) and Aptech (16 per cent) took the lead in pulling down the market.

The crash could have been a historic one but for select old economy stocks that saved the day contributing considerably to contain the downslide in the Sensex. The sentiment was also affected adversely by reports of stocks crash on Hong Kong and Japan stock exchanges. "Nasdaq has been falling on a daily basis for the last two weeks. There is also concern about the falling overseas revenues of Indian tech companies," said an NSE dealer.

Another big loser was Tata Chem, which lost 16% today on the news that the company's plant has caught fire. Some key gainers were SBI, ACC, Guj Ambuja, Hindalco, Indal and oil PSUs like BPCL (16.6%) and HPCL. Shares of banks and public sector undertakings, however, found fairly good demand in the light of reduction in bank rates by 50 basis points and defeat of opposition-sponsored motion against Balco's privatisation in Lok Sabha yesterday.