Mumbai: Oct. 17 The widely tracked 30-share Sensex on Friday plunged below the 10,000-level for the first time since July 2006, leaving market participants aghast.
Although investors expected this to eventually happen, the actual decline of the index to a four-figure level has intensified the degree of fear and uncertainty among them.
“We cannot say anything about the markets… or what would be the next low,” said a dejected broker.
After opening in the green at 10,763, the index finally closed 606 points down at 9,975, losing 5.7 per cent from its previous close.
While it took more than two years for the Sensex to move from 10,000 to 21,200 in January this year, it took just three quarters to slip back all the way.
The Sensex heavyweight Reliance Industries closed 6.5 per cent lower at Rs 1,305; earlier in the day, it had touched a new 52-week low of Rs 1,290.
The Nifty too neared the 3000-level as it hit an intra-day low of 3046. It finally closed at 3074, a fall of 5.9 per cent.
Indian stocks started their journey southward after the European markets, which had opened in the green, turned weak. Also, the Dow Jones Industrial Average Futures index charted the same path, said an analyst.
All the Sensex stocks closed in the red, the index heavy weights losing between 5 and 10 per cent.
The BSE Small-cap and Mid-cap indices declined less, and were down 2.76 per cent and 3.07 per cent respectively.
The FIIs were yet again net sellers, their net sale amounting to Rs 915 crore on Friday. Domestic institutional investors bought equities worth Rs 713 crore, according to the data furnished by the custodians to the stock exchanges.
FII outflows are a global phenomenon and not due to any domestic factor, said analysts.
“The hedge funds and investors using participatory notes have been unwinding their positions. The international investors, particularly in these two categories, have pulled out their investments from the mid-cap and small cap companies,” said Mr T.P. Raman, Managing Director, Sundaram BNP Paribas Mutual Fund.
On the redemption pressure on mutual funds, especially the FMP schemes, Mr Raman said, “Corporates that have put money in mutual funds are taking it back as lending by banks is under strain. Though the Government and RBI have stepped in to ease liquidity, it may take 15 days to one month for the situation to ease.”
However, as the sub-10,000 level looks attractive, retail investors have started bottom fishing. BSE’s client data indicated a net buying for Rs 148 crore by them, while the proprietary trade by the brokerages showed a net selling for Rs 109 crore.
“We cannot rule out one more bout of panic selling. But buying support is likely at the 9000-9500 level,” said an analyst.
BSE indices for Realty, Power and Metal were the worst affected registering a 6 to 10 per cent fall.