The Hindu : Business : FII selling reverses rally on bourses

Online edition of India's National Newspaper
Monday, Jan 10, 2005

Business

Business

FII selling reverses rally on bourses

THE BOURSES witnessed some heavy selling at the higher levels by foreign institutional investors and hedge funds particularly in index based stocks which brought about the expected correction from the middle of last week. After touching the historic peak of 6696.31 in intra-day trades on Tuesday, the Sensex (the benchmark 30 share sensitive index of the Bombay Stock Exchange) took a nosedive in the next two days before looking up on bargain hunting on Friday. The index closed the week at 6420.46, with a loss of 182.23 points over the previous week.

On the National Stock Exchange, the NSE S & P CNX Nifty index shed 65 points, or 3.12 per cent to end at 2,015.50, after touching its lifetime peak of 2120.15 on Tuesday.

According to market circles, selling pressure emerged amid fears of a possible hike in U.S. interest rates that may affect the inflow of foreign funds into the stock market.

The market witnessed a major sell-off on Wednesday and Thursday after the Federal Reserve expressed its concern over inflation, which led to fears of hikes in interest rates and a stronger dollar.

This prompted hedge funds to cut their exposure in global commodities markets and emerging markets including India.

The Sensex lost 283 points in two sessions wiping out investors' wealth to the tune of Rs. 90,000 crores.

Local operators and retail investors joined the selling spree. Brokers triggered the margin calls which resulted in further selling. The downslide was aggravated by a warning note from global rating agency Standard & Poor's over India's widening fiscal deficit and a meltdown in foreign metal prices.

Foreign institutional investors, which pumped in Rs. 546.50 crores on the first two days of the week, started effecting net sales in the remaining sessions. However, some pivotals could regain part of the losses on Friday with buying from institutional investors and mutual funds.

The metal sector bore the brunt of institutional sell-off triggered by a steep fall in metal prices on the London Metal Exchange early last week. Stocks such as National Aluminium, Hindalco, SAIL, Tata Steel, Hindustan Copper and Hindustan Zinc registered sharp falls following reports that the growth in global demand for aluminium will drop to 5.3 per cent from 8.1 per cent last year.

However cement stocks Gujarat Ambuja, ACC, Madras Cements and UltraTech Cemco rose on hopes of good third quarter results on strong demand and improved realisations.

Banking stocks continued their upward journey on expectations of liberalised FDI norms and likely consolidation in old private sector banks. Shares of public sector banks such as Canara Bank, Bank of Maharashtra, Union Bank of India, UCO Bank and Bank of Baroda registered further gains.

The Government's measures to put an end to the rising sugar prices resulted in a quieter tone in sugar scrips which were ruling high earlier. The Government has announced an additional free sale quota for the January-March quarter to contain price levels for the commodity.

Following reports that the Ambani brothers have agreed to a legal split to put an end to the ownership battle, stocks of Reliance group staged a recovery.

Among pharma stocks, Glenmark Pharma went up on the news of a bonus issue in the ratio of 1:1. Kopran and Nicholas Piramal too witnessed some buying interest.

The total volume of business on the BSE and NSE improved to Rs. 13,016 crores and Rs. 28,689 crores from the last week's turnover of Rs. 10,644 crores and Rs. 24,484 crores respectively.

Rupee tumbles

The rupee tumbled against the U.S. currency after a resurgent dollar overseas fuelled heavy dollar demand amidst rising global oil prices, undergoing a sharp downward correction from five-year peaks logged at the close of trade on the last day of 2004. In volatile trade at the inter-bank foreign exchange market during the week, the rupee ended at Rs. 43.82/83 a dollar, 37 paise lower from 43.45/47 struck at year end.

Interest rates steady

Interest rates were stable during the week. The ten year government security was traded at 6.55 per cent and the five year security at 6.35 per cent. The year on year inflation came down further to 6.39 per cent for the week ended December 25.

Our Bureau

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section

Pension funds are coming

Do not hype

Firefox in your key-chain

Big Blue with a Red Flag

FII selling reverses rally on bourses

Ordeal for the disabled