FII sell-off, CRR hike trigger plunge

FIIs, along with market operators, delivered a body-blow to the market today with the S&P CNX Nifty dropping to a low of 3,800 from the previous day close of 3,962, down 162 points. The FIIs had triggered a sell-off last Friday by short selling 27,300 Nifty contracts valued at Rs 1,080 crore.

The market was rife with rumors that FIIs had sold Nifty and stocks futures worth Rs 2,000 crore today. The December series of Nifty was sold heavily in the market with Nifty open interest increasing further by 44.85 lakh shares to 32.57 million shares. The December Nifty clocked a turnover of Rs 16,226 crore, up 16% from the Friday level.

The Nifty recovered thereafter to close at 3849.50 thanks to buying at lower levels in Bharti Airtel, Tata Steel, Reliance Communications, BHEL, HDFC Bank and VSNL. The stocks recovered between 4-8% cent from the day’s low levels.

Rahul Rege, business head (non-institutional) at BRICS Securities, said the market was anticipating a correction after the failure to sustain the recent momentum in the indices last week. "I think, today's fall was an over-reaction. Further, investors are yet to recover from the May-June fall," he said.

According to him, the market cannot be compared to the May-levels. "I don't see the market in an overly leveraged situation," Rege added.

An analyst at a local brokerage firm said he expected support to come around 3,830 level for the Nifty. The surprise decision by Reserve Bank of India (RBI) late on Friday was the trigger for today's fall, which slowly spread to other sectors and stocks. "Clearly, there was some build up happening in banking stocks over the last 1-2 weeks. The hike in CRR was good in terms of reducing this build up," the analyst said.

An analyst at a local brokerage firm said he expected support to come around 3,830 levels for the Nifty. The market witnessed substantial build up at the next support level of Nifty at 3,800 with open interest in 3800 put increasing almost 15% or by 2.47 lakh shares.