Sensex Crashes on Political Uncertainties.
March .05,1999
Political developments over the just concluded extended weekend continued to deteriorate the sentiment on the bourses as stock prices crashed. With the ruling Bharatiya Janata Party (BJP) rejecting demands of the AIADMK chief J Jayalalitha, the political scene is considered to have worsened and this will have serious impact on the future of the Vajpayee government.
As political equations in the capital have been changing with Jayalalitha's threat of withdrawing, political observers feel that Vajpayee government appears vulnerable at this point of time. Stock markets have responded accordingly to the changing political milieu. Operators, apprehensive of the political uncertainties, preferred to offload long outstanding positions on the bourses. Short sellers took
advantage of the worsening situation and reported to have sold short in huge quantities.
Speculative activity continued to dominate the markets as operators unwound outstanding long positions in a number of counters. Volumes on the bourses remained low. While the domestic institutional investors were reported to be selling at higher levels, foreign institutional activity was marginal on account of easter holiday in the Western countries and Hong kong. A number of blue chips - domestic as well as multinational - hit the lower limits of the circuit breakers on the bourses.
Stock indices crashed following massive selling pressure. The BSE 30-Share Sensitive Index (Sensex) opened weak with a negative gap at 3625.21 and continued to decline as selling pressure continued.
Towards the end, the Sensex touched the day's low of 3499.83, before settling at 3519.39, losing 166.90 points from its previous closing of 3686.29. The BSE 100-Share National Index (Natex) also lost 74.1 points from its previous closing of 1633.87.
Software counters were the major losers on the bourses. All front line and second rung software stocks witnessed unwinding of long positions by the speculators. A number of software counters, which had risen substantially in last couple of months, hit the lower limit of the circuit breakers on the bourses.
Satyam Computers hit the lower limit of the circuit breaker at Rs 1564.25, Pentafour Software at 1151, Rolta India at Rs 175.80, Silverline Industries at Rs 323.75 and KLG Systel at Rs 316.25.
Others like NIIT, Tata Infotech, Wipro, BFL Software, Cyber Tech Systems etc. declined sharply on speculative selling. Others like Tata Elxsi, DSQ Software, Orient Information hit the lower limits of the circuit breaker. DSQ Software continued to hit the lower limit of the circuit breaker at Rs 358.75.
Pivotals were mainly responsible for the crash of the Sensex. State Bank of India dropped below Rs 200-mark and hit the lower limit of the circuit breaker at Rs 189.60. Reliance Industries declined from Rs 128.20 to 121.80, ITC declined from Rs 918 to 872 before settling at Rs 883.75. Hindustan Lever declined from Rs 2220 to 2157 before settling at Rs 2174.75. Tata Steel fell below Rs 100-mark and closed 94.90. Tata Engineering hit the lower limit of the circuit breaker at Rs 153.30.
BHEL hit the lower limit of the the circuit breaker at Rs 216.30 following disappointing performance for the year ended 9903. ABB hit the lower limit of the circuit breaker at Rs 404, Bausch & Lomb at Rs 120.40, Ashok Leyland at Rs 42.20, Siemens at Rs 246.20 and Godrej Soaps at Rs 66.60.
Among others, Zee Telefilms, MTNL, Siemens, Mahindra & Mahindra, Larsen & Toubro, Finolex Cables, ACC, BPCL etc. were weak on profit booking. All major pharmaceutical and fast moving consumer goods (FMCG) counters were weak. E Merck (Rs 649) and Pfizer (Rs 1188.25)hit the lower limits of the circuit breakers on the BSE. On the other hand, counters like Voltas, Madras Refineries, Indian Rayon and MRF managed to remain above their previous closings.
While there is no apparent reason for the markets to crash, political developments will continue to have tremendous influence on its performance at least for the short term. Players feel that unless the problem is solved immediately, the markets will continue to drag as operators as well as FIIs would not like to take fresh positions in cncertain times.
However, one section of the market feels in case of the fall of the BJP government, the only party that can form the government would be Congress and it will have Dr Manmohan Singh as the finance minister. The economic policies in that case could be only reforms-oriented. We are sure markets like that..
(source:Capital Market) |
