Sensex sees biggest single day fall and rise this week

What a week it was. We saw everything from biggest single day fall of 1408 pts on Monday to biggest single day gain of 1140 pts on Friday. On the face of it, the Sensex lost 652 pts and ended at 18362 but it swung nearly 3000 pts; hitting a low of 15,332 during the week. On similar ground, the Nifty shaved off 322 pts to end at 5383 but swung nearly 900 pts; hitting a low of 4448.5 during the week. The midcap and small-cap indices paid for earlier sins as they lost 9.2% and 14.3% respectively. Barring the IT Index (which had fallen a lot earlier) and the Bank Index (where there are hopes of rate cut next week), all sectoral Indices ended in the red. With BSE Oil & Gas and Metal Index suffering the most, losing nearly 10%.

Apart from probable U.S. recession risk, systemic trading trouble due to margin funding in the domestic market proved to be the catalyst for the fall. The ghost of May 2006 seemed to have come back to haunt the market. Investors faced forced selling as they were unable to pay margin calls due to over leveraged positions and poor quality of stock in the futures and options market just added fuel to the fire. Broker terminals were shut off; retailers were barred from taking further positions and FIIs sold nearly $3.7 bn in the cash market during the last 7 trading sessions.

Some sanity seemed to have returned to the markets on the last 2 days of the week, as almost 40% of the stock futures positions got squared off due to the market fall which made the market healthier and controlled by stronger hands. Globally, the FOMC announced an unscheduled rate cut of 75 bps and President Bush tried to jump start the economy with a US $ 150 bn economic stimulus package and tax rebates. One of the most important lessons, which investors have learnt from the fall, is "Do not over leverage your positions and respect fundamentals in the market". As the saying goes, "When you lose, don't lose the lesson"

Summary

• Market witness biggest single day fall and biggest single day gain during the week
• Sensex ends down 652 pts at 18362; swings nearly 3000 pts during the week; hits low of 15,332.42 during the week
• Nifty ends down 322 pts at 5383; swings nearly 900 pts during the week; hits low of 4448.50 during the week
• CNX Midcap Index down 9.26%, BSE Small Cap down 14.3%
• All sectoral indices end in the red barring banking and tech sector
• BSE Oil & Gas Index down 11%, BSE Metal Index down 9.6%
• Index Losers: MTNL down 21.9%, ONGC down 16.1%, Tata Power down 13.7%, Suzlon down 10.5%
• Index Gainers: Satyam up 9%, Bharti up 4.7%, PNB up 4%, Infosys up 3.5%
• Non-Index Losers: Neyveli Lignite, Hind Motors, WWIL, Nag Fert, RNRL down nearly 30% each
• Non-Index Losers: Parsvnath down 28%, Oswal Chem down 27%, TVS Mot down 26%, Arvind Mills down 25%

Varinder Bansal