The Hindu : Business : Sensex crashes by 617 points

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Tuesday, Apr 03, 2007
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Business

Sensex crashes by 617 points

Special Correspondent

The recent RBI moves triggered the fall

IN A TAILSPIN: An unidentified person watches a screen displaying the share prices outside the building of the Bombay Stock Exchange in Mumbai, on Monday. — PHOTO: AP

MUMBAI: Stock markets began the new financial year on a disappointing note with the benchmark Bombay Stock Exchange (BSE) 30-share Sensitive index (Sensex) dipping by 616.73 points on Monday. This is the second biggest single-day fall for the Sensex ever.

"I think the market fell because of the hikes announced by the Reserve Bank of India (RBI) in the repo rate and the cash reserve ratio (CRR). But I expect the market will consolidate around this level and wait for the quarterly results and then make further move,'' said Motilal Oswal of Motilal Oswal Securities.

While index heavy weights suffered a sharp fall, banking, auto, construction, steel and real estate stocks featured in the decline.

A rise in short-term rates affected bank stocks negatively (on fear of their profitability being affected) and heavy selling was witnessed in this sector.

"It is a reaction to the sudden hike in the cash reserve ratio (CRR) by the Reserve Bank of India last Friday,'' said Vikas Khemani, Head, Institutional Equities, Edelweiss Securities. The central bank hiked the CRR by 50 basis points in two stages of 25 basis points, starting April 14 to tighten liquidity in the system and to contain rising inflation. The RBI also raised indicative short term lending rate (repo rate)by 25 basis points.

"I think it (the sharp fall in indices) highlights the concern of investors on Government's policy measures to contain inflation and the equity market over the medium term,'' said Mr. Khemani, adding that "I believe a re-allocation of the asset class is happening and the equity exposure is likely to get reduced from investors portfolio.''

On the National Stock Exchange (NSE), the 50-Share Nifty lost 187.95 points or 4.92 per cent at 3633.60. The Sensex closed at 12,455.37, a loss of 4.72 per cent. BSE recorded a turnover of Rs. 2,924.08 crore compared to last Friday's turnover of Rs. 3,011 crore.

Selling was spread over entire segments of the market. BSE Midcap stocks lost 174.83 points or 3.25 per cent at 5209.29 and BSE Smallcap lost 176.45 points or 2.73 per cent at 6294.06. BSE-100 lost 299.52 points or 4.55 per cent at 6287.69, BSE-200 lost 69.59 points or 4.47 per cent at 1487.13 and BSE-500 lost 212.08 points or 4.28 per cent at 4743.31.

However, other leading Asian markets edged up on Monday's trading.

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