Market tanks in last-hour selloff, Street gets a scare

Tags: News
Equity benchmark Sensex plunged below the 21,000 mark on Thursday after what market participants suspected to be a case of basket selling by some foreign institutional investors in the last hour of trade.

Basket selling involves selling in a group of securities simultaneously. A trade is considered basket trade when it typically involves sale of 15 or more stocks. The BSE benchmark fell nearly 500 points from its intra-day high amid volatile trading.

The market experienced high volatility with Sensex falling 484.53 points from an intra-day high of 21,331.20 to a low of 20,846.67 due to a selloff in the last hour of trading.

The 30-stock benchmark eventually closed at 20,888.33, down 1.19 per cent or 252.15 points, with 25 of the 30 stocks ending in the red and only five managing to log some gains.

Nifty declined 80.50 points to close at 6221.15 after an intra-day swing of 150 points. The BSE midcap and smallcap indices saw sharper falls at 1.77 per cent and 2.03 per cent, respectively.

Paras Bothra, vice-president for equity research at Ashika Stock Broking, said, “Some of the FIIs may have gone for profit booking by resorting to basket selling in the last hour of trading, which led to the sudden fall in the market.”

Bulk deals data disclosed on NSE and BSE and provisional data showing FIIs as net buyers of equities worth Rs 674.05 crore didn’t provide much clarity on the FII action. Domestic institutions were net sellers of equities worth Rs 189.75 crore.

“FIIs were back in the market after the yearend holidays and may have resorted to profit booking,” Bothra said, adding that Aam Admi Party’s increasing prominence raised doubts over the BJP coming to power with full force, which might have given foreign institutional investors a scare of coalition politics at the centre.

On FII activity, Gaurang Shah, assistant vice-president of Geojit BNP Paribas Financial Services, said, “We saw sell side orders overtaking buy side orders as the depth and breadth looked weak due to low participation.”

“Market participants feel some basket selling would have happened near the crucial 6,350 level on the Nifty. The selling was so intense that barring the BSE IT index, all other sectoral indices ended in the negative terrain,” brokerage IIFL said in a report.

Alex Mathews, head of research at Geojit BNP Paribas Financial Services, said, “The weak manufacturing PMI data added fuel to the downtrend. The HSBC manufacturing data for December stood at 50.7 points against 51.3 in the previous month.” A reading below 50 signals contraction in manufacturing activity.

All sectors that were in the green in the morning session closed in the red with realty, capital goods, power, banking and metal stocks being the biggest losers. Major selling was seen on the realty and capital goods counters, with the indices representing them losing 3.07 per cent and 2.84 per cent, respectively. The rupee too lost ground, closing 36 paise lower at 62.26 against the dollar.

The heavyweights that dragged the benchmark indices down included ITC (down 2.08 per cent), RIL (down 1.5 per cent), ICICI Bank (down 2.03 per cent), ONGC (down 2.38 per cent) and L&T (down 3.04 per cent).

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