Sensex wilts 717 pts as PN heat persists

FIIs net sellers for the second day offloading Rs 3,916 crore.

The Bombay Stock Exchange’s sensitive index, Sensex, fell nearly 4 per cent today after an early rally to a record high triggered a bout of selling in the last half hour by foreign funds, worried about the proposed curbs on inflows through participatory notes (P-notes).

The regulator, on October 16, suggested foreign institutional investors (FIIs) shouldn’t be allowed to issue or renew offshore derivative instruments linked to futures and options.

The index ended the day at 17,998.39 points, down 717.43 points, or 3.83 per cent, after rising as much as 2.6 per cent to 19,198.66 — its 19th record in 21sessions — in the morning.

The sell-off picked up in the last half hour, and at one stage just before the close, the benchmark index had fallen more than 5 per cent. The broad-based Nifty 50 ended the day at 5,351, down 208.3 points, or 3.75 per cent.

FIIs were net sellers for the second consecutive day offloading to the tune of Rs 3,916 crore (Rs 1,130 crore in the cash market and Rs 2,786 crore in derivatives). Like yesterday, domestic institutions were net buyers at Rs 96 crore.

The Sensex rose rapidly in morning trade, even touching its all-time high of 19,198.66 points. Major buying was seen at IT and pharma counters following a weaker rupee and good corporate results. TCS was up 2.17 per cent to Rs 1,118.85 a share after it announced a $1.2 billion deal with Nielsen.

Market participants said that selling started on rumours that the National Stock Exchange (NSE) increased the SPAN margin for trading in the futures and option segment. The exchange did not confirm it but buying did not pick up.

“There was a bit of short covering in the market today in the morning. In the fall, the momentum stocks have been hit due to FIIs unwinding their positions,” said Jayprakash Sinha, head of research, Ambit Capital. Others said the market today behaved the way it should have behaved yesterday.

Market participants believe that this could be a short-term trend since regulatory uncertainty is scaring FIIs.

“We would urge investors to keep buying in small tranches since the market is likely to behave in this manner for some more days. The markets went up at a breathtaking pace and so this is something that we expected. However, in two or three months, we should be back to the bull run,” said Kartik Jhaveri, director of Transcend Consulting, a Mumbai-based private wealth management firm.