Recent Sensex Biggest Crashes

Following are some of the biggest single day falls of the BSE Sensex in recent history:

Sr. No	Date	Crash
1	January 21, 2008	1,408.35 points
2	Oct 24, 2008	1070.63 points
3	March 17, 2008	951.03 points
4	July 6, 2009	870 points
5	January 22, 2008	857 points
6	February 11, 2008	833.98 points
7	May 18, 2006	826 points
8	October 10, 2008	800.10 points
9	March 13, 2008	770.63 points
10	December 17, 2007	769.48 points
11	January 7, 2009	749.05 points
12	March 31, 2007	726.85 points
13	October 6, 2008	724.62 points
14	October 17, 2007	717.43 points
15	September 15, 2008	710.00 points
16	January 18, 2007	687.82 points
17	November 21, 2007	678.18 points
18	August 16, 2007	642.70 points
19	August 17, 2009	626.71 points
20	June 27, 2008	600.00 points
21	February 24, 2011	545.92 points
22	November 16, 2010	444.55 points
23	February 4, 2011	441.92 points
24	November 12, 2010	432 points
25	August 5, 2011	387.31 points
26	November 19, 2010	345.20 points

Hedge funds caused market crash ?

There were two rumours doing rounds explaining Wednesday’s bungee-jump by the stock markets.

One was that there was a firesale by three India-focussed hedge funds.

The second was that one of India’s big bulls, who has been sitting on big shorts for some months now, has been asked by New Delhi to cover positions and not to try and bring the market down. That there was significant short-covering is true because Nifty Futures volume hit an all-time high of 5.69 crore shares on Wednesday.

Such was the rush to cover, the Sensex recovered nearly 600 points from an intra-day plunge of 954, to close out at 11,328.

“The hedge funds, of which one of them is over a billion dollars, are selling as they have to redeem money to their investors. They are not going to see the prices or value, they will go out and just sell. And, since buyers are absent, the impact cost is very huge,” says Rohit Kothari, CEO, Antique Finance, which primarily deals with corporates and institutions.

Sources said the big bull also had to dump L&T shares to meet mark to market requirements on Monday, leading to a 11% plunge in the stock, which took the share below the Rs 1,000-mark.

The high impact cost on individual stocks is also seen as a reason for spurt in Nifty volumes.

Sandeep Singal, head of institutional derivatives, Emkay Global, said since the market is becoming less liquid, action is shifting to the index.

“People who have been trading in stock futures and stocks are moving to the index, which could be one of the reason for the all-time high volume. Also, organised efforts by all central banks gave a sentimental boost. People who were short were wary of carrying positions over the holiday as if things turn either way and global markets rally, Friday could see a huge gap-up opening. People who shorted did not want to take this chance, leading to a huge covering rally.”

Some technical analysts also feel this could be a sign of things turning for the better.

The previous highest Nifty volume of 5.4 crore shares was clocked on January 21, 2008, when the market took the turn for the worse.

Ashok Jainani, vice-president of research, Khandwala Securities, said record volumes in Nifty futures is a sign of positive divergence. “With the global central banks coming together to ease the monetary situation accompanied by the recent RBI and Sebi moves, the market may have made a significant bottom that should hold for the medium term. We are suggesting our clients to buy strong frontline stocks. The recent dollar appreciation (about 22%) has bolstered RBI’s coffers significantly, which would help government finances and country’s foreign exchange reserves position.”

Gaurav Dua, head of research, Sharekhan also feels the bottom is nigh.

“We are now trading close to 11 times one-year forward earnings. In the past if you see, we have bottomed out around 10-times forward earnings. So the downside risks are not that high. In terms of time, there could be some months to go. In the last two bear runs, the bearish period lasted 85-90 weeks or close to 18 months. We could have some more to go in terms of time correction.”

However, will history be relevant in an unprecedented global crisis?

Experts feel though the crisis around the globe is unbelievable, India is placed much better than most in terms of economic growth and corporate sector health. Indian corporates are a lot less leveraged and the debt-equity ratio is much more manageable than during the last bear run.

Manish Bandi, vice-president, PMS, India Infoline, said there is a squeeze on liquidity with many FIIs on the verge of winding up.

“Worldwide prices are falling because of fundamentals. In India, it is happening on account of the liquidity problems.”

So, he says, in the the event if a turnaround, India will improve faster.

via DNA MONEY

The Market Crash - Stocks

The Market Crash - Stocks

SEBI probes into fall

Securities markets regulator SEBI is probing the role of various market players, especially top foreign portfolio investors, in the stock market collapse on Wednesday when the BSE Sensex fell by over 1,700 points within minutes after market opening.

Confirming the development, a senior SEBI official told ET on condition of anonymity that the regulator has already commenced a “patch analysis” (jargon for an analysis of market movements in a short period, or a patch to check manipulation).

The record fall in Sensex within minutes after the market opened last Wednesday happened on the back of relatively small volumes. Trading was temporarily halted on BSE and NSE after the indices breached the first trigger point for the day’s circuit filter.

According to regulatory officials, this suggests the trades had deliberately been done at prices that were way off the market. SEBI has called for details of these sales transactions and is in the process of culling the necessary information.

Trading resumed an hour later after the circuit filters were removed and the market recovered 1400 points to close at 18,715.82, down 336.04 points over the previous day’s close. It is understood that large purchases were made by entities that are also among the largest issuers of participatory notes (PNs).

The probe will ascertain whether some of these players had indulged in price manipulation, sources said, as it is possible the same set of foreign investors who had put sell orders on opening were also the first to snap up stocks after the market reopened after an hour.

According to some market players, the events of last week seem to be a repeat of what happened on May.17, 2004, now known as Black Monday. That day, the Sensex plunged by 842 points intraday and trading was stopped twice on BSE and NSE. This was the time when the NDA government had been voted out and the new UPA government had not assumed office.

A SEBI probe later found that UBS Securities, a foreign portfolio investors registered with the regulator, had sold stocks worth Rs 188.35 crore through its proprietory sub-account in the cash market. A few days earlier, UBS had built up Nifty future short positions worth Rs 434 crore and stock futures and options aggregating Rs 292 crore. The regulator tried to ascertain whether the firm had violated its regulations relating to fraudulent and unfair trading practices.

However, UBS did not furnish details citing client confidentiality in some cases, leading to a SEBI order banning it from the market for a year. This was contested at the Securities and Appellate Tribunal, which struck down the order later.

Officials concede that gaining conclusive evidence to prove that these portfolio investors acted with the motive of manipulating stock prices could prove to be tough. This would call for plugging into hours of taped conversations in dealing rooms of brokerages and offices of the foreign portfolio investors and identifying the ultimate investors.

Not that such probes have not been carried out in the past. For instance, Deutsche Borse had punished a top global securities firm for indulging in unfair market practices in the bond market a couple of years ago.

Insanity out, anxiety in

The International Monetary Fund (IMF) updated its forecast for global growth this year and next. It projects growth at 5.2% for both these years. This is an impressive number and hence runs the risk of being spectacularly wrong, particularly for 2008. Further, financial market action last week suggests that the forecast upgrade could not have been more ill-timed.
Stocks in the US declined by 2-3% on Thursday and most Asian markets, including India, responded in sympathy on Friday. Many expected US stocks to recover on Friday. They did not. That would have caused some nerves to fray. The questions are how long will this run and how deep would the correction be.
Investors might find it injurious to their financial health to draw solace from the sunny answers of most investment strategists on Wall Street. They did not warn us on the spillover from US mortgage borrowers, lenders, brokers to securitized products, to leveraged buyouts, to credit markets and to Wall Street banks and brokers. Investors would look for clues in fundamentals to decide if this would last or prove to be shortlived.
They would then turn to forecasts such as the one that IMF made recently, the strength of corporate balance sheets, growth rates in most emerging economies, and to what they see as reasonable valuations in many stock markets. In doing so, they would be committing a mistake. The rally of the last five years was not about fundamentals, but about a rose-tinted view of the economic fundamentals of most countries in the world and abundance of liquidity provided by banks to hedge funds, hedge funds to private equity managers, banks to private equity managers and now sovereign wealth funds—funds set up to manage the foreign exchange reserves - investing in risky assets.
A friend who co-manages a hedge fund incubator, while demurring at my sober outlook for global asset markets in the coming years, did admit that banks were ready to provide leverage to the extent of 49 times and, in some cases, even 99 times to start-up hedge funds with no track record either in investment performance or in risk management. That sums up the problems with global finance. It has been all about returns, nothing about risk.
Some segments of this assembly line of liquidity are now shutting down. Readers should appreciate that this assembly line was lubricated with multiple layers of leverage. A hedge fund uses leverage as mentioned above to buy assets. Securities packaged out of mortgages are leveraged and they are repackaged further. Hedge funds buy the lower-rated tranches of these double-packaged debt securities. Some hedge fund investors, too, are leveraged. Hence, a decline in asset value is like a spark that runs through the wires to the final explosive quickly. Here, the leveraged funds explode rather quickly and that hurts a lot of investors because they have used debt and quickly face margin calls. Credit tightens or seizes up at many levels.
That is the difference between 2006 summer and now. The correction then was triggered by cyclical tightening concerns. Now, it is the bursting of the credit bubble and, repeat, not just housing finance. Therefore, its path would be relatively more volatile, unpredictable, prolonged and punctuated by large rallies and false dawns over the next few years.
Optimists will point out that sovereign wealth funds would step in to provide stability to markets. It is possible. However, in doing so, they would be playing the role of Greenspan who always stepped in to help stabilize financial markets with interest rate reductions. That spawned bubbles in Internet and technology stocks and in housing finance. But that did not prevent the technology bubble from bursting. It probably made the bubble bigger. That is what sovereign wealth funds would be doing if they prop up markets. They might be able to delay the inevitable, not make it disappear.
Into this mix, one must throw the volatility that the price of crude oil would cause to economies, to the inflation outlook and asset prices, particularly in Asia. Asian economies have only been superficially strong. Now that the tide of liquidity has withdrawn, the rising price of oil would reveal that many Asian economies and markets were swimming naked.
Mohammed El-Erian, the president and chief executive of Harvard Management Co. and a faculty member of the Harvard Business School, in an excellent article in the Financial Times on Thursday succinctly observed that we may be exiting the world in which “individual investors’ performance was essentially a function of the degree of their exposure to the most illiquid and leveraged asset classes”. In the coming years, however, investors’ performance would be a function of the degree of their composure.

Global Doom & Gloom

This week was quite memorable. The markets were volatile, with the Sensex scaling a new high on Monday to fall on Wednesday. The F&O expiry witnessed a record turnover on Thursday. Quarterly results continued to be declared. The rupee continued its upward descent against the dollar.

On Friday, the Indian market closed in the red. But it was not just in India that mood was subdued. Global markets too felt the tremors of rising interest rate concerns caused by high inflation, rising oil prices which will further aggravate inflation.

World markets plunged on Thursday, hit by concerns that higher interest rates will hit profits and takeover deals. Rising interest rates have indicated that the days of easy money are over. According to observers, the tightening of credit is causing a lot of uncertainty. When looked in the light of the rising share prices been largely driven by takeovers - corporate or private equity, this does take on some amount of significance.

The fall was initiated by US markets. The Dow plunged 311.50 points to 13,473.57. The close was its worst since a 416.02 point loss on February 27, 2007. T he concern was that not only would higher corporate borrowing costs curb the rapid pace of takeovers but also aggravate the sluggish environment for home sales and the continued defaults in sub-prime loans.

But in London, the FTSE 100 rebounded into positive territory, easing fears that the share slump would be extended.

Let's wait and see.

Analysts expecting another sharp drop in markets today

Taking a cue from the continued decline in US equities, the Indian equity market could witness another sharp decline on Monday, say analysts. The weakness could persist for the next two to three trading sessions, they add. The Dow Jones Industrial Average dipped 208 points, or 1.54%, to end at 13,265.47 on Friday.
Indices across the world had plunged on Friday after US markets crashed on Thursday. The Sensex—the benchmark index of the Bombay Stock Exchange (BSE)—shed 3.4% to close at 15,234.57 as foreign institutional investors (FIIs), the single most influential force in the markets, started selling.
FIIs were net sellers of equities worth Rs1,475 crore on Friday, while domestic institutional investors took this opportunity to buy shares (they were net buyers of equities worth Rs727 crore).
This was a sharp reversal of the trend witnessed so far this month. Until 26 July, the FIIs had made net investments of about $10 billion (Rs40,500 crore), while domestic institutions were net sellers of more than $2 billion worth of equities. Foreign portfolio fund managers, analysts say, are trying to cut short their exposure to riskier assets such as emerging markets equities.
Looking pensive: Investors standing outside the Bombay Stock Exchange react as the benchmark index shed 3.4% on Friday. Indices across the world fell after US markets declined the previous day.
Ketan Karani, head of research at Kotak Securities Ltd, says FII inflows could moderate in the next few weeks. “The ripple effect of problems in US financial markets will continue in our market. The liquidity in our market will dry up if the money flow from US investors slows down,” he adds.
But Lalit Thakkar, head of research at Angel Broking Ltd, says the correction period in the market will not last long. “There is no doubt that all the Asian markets will open weak on Monday morning. However, the fall will not be as steep as witnessed on Friday’s trade,” Thakkar adds. “FIIs currently own about 20% of the Indian equity market. India is still one of the strongest markets in terms of corporate earnings growth. It is very unlikely that this negative sentiment among FIIs will continue for long.”
Trading volumes on Friday’s session were very high, say technical analysts, pointing out that this signals an immediate risk. “When the market falls sharply on heavy volumes, it indicates severe weakness,” says Vinit Birla, a technical analyst at Mumbai-based Pranav Securities. Short positions built up by speculators will add to the downward trend.
“There is strong short build-up in many blue-chip counters and heavily on the index. This indicates fresh losses on Monday. The weakness will continue for three to four trading sessions. We see 14,700 as the downside for the Sensex. At that level, the index could start a positive rally to recover lost ground. In the case of Nifty, 4,310 is the downside,” he said.
Another Mumbai-based technical analyst who did not wish to be identified says a recovery rally could start in Asian markets after a few trading sessions. However, he expects plenty of volatility in the market. “I would advise taking a neutral position in a market such as this. The Nifty futures are trading at about 40 to 45 points discount. There is huge short build-up on the index. The Nifty could get support at 4,380 levels. If the Nifty breaks below 4,320, it could create panic leading to margin calls. This could accentuate the sell-off,” he adds

Sell off likely

We will probably get discounts today - If you get a moment, where Infosys is 1500 BUY :) - these discount SALES come once in a while.

Don't panic - people who bought at 4500 in May 2004 made money.

Be sensible and don't add to the discount sale and yes, don't look at Udayan and Mitali flirting and scaring you.

And, Marc Faber is an a.....e - he magically appears on TV when market falls.

Asian Stocks Add to Global Rout After China's Slump; BHP Drops

Asian stocks fell the most in more than eight months, extending a global selloff sparked by the biggest plunge in Chinese shares in a decade. BHP Billiton Ltd. and Posco led declines.

In the U.S, the Dow Jones Industrial Average dropped as much as 546 points, the most since the first trading day after the Sept. 11, 2001, terrorist attacks. Chinese stocks yesterday fell the most since 1997 after the government took measures to crack down on excess speculation that had driven shares to records.

``This will reverberate in Asian markets again today,'' said Shane Oliver, who helps manage about $64 billion at AMP Ltd. in Sydney. ``China's market has been poised for a correction for some time, which has made other Asian markets vulnerable too.''

The Morgan Stanley Capital International Asia-Pacific Index fell 3.3 percent to 143.80 at 11.30 a.m. in Tokyo after rising to a record yesterday. The gauge was set for its biggest drop since June 13. Chinese markets opened down, and swung between gains and losses.

Japan's Nikkei 225 Stock Average slumped 3.6 percent, set for the biggest drop since June 13. Toyota Motor Co. added to declines after the yen strengthened against the dollar in New York, eroding the value of exporters' sales.

Singapore's Straits Times Index plunged 5.3 percent while Malaysia's Kuala Lumpur composite Index tumbled 8.1 percent, leading declines elsewhere in the region. Stocks in China and Hong Kong may also slide for a second day, after the American depositary receipts of China Mobile Ltd., the world's largest mobile-phone operator by users, slumped 10 percent.

The Dow fell 3.3 percent while the Standard & Poor's 500 Index lost 3.5 percent, wiping out their year-to-date gains. The Nasdaq Composite Index slid 3.9 percent, its steepest drop since July 2002. Europe's Dow Jones Stoxx 600 Index slid 3 percent and emerging markets dropped.

China Tumbles

Shares also fell after U.S. durable goods orders fell 7.8 percent in January, reflecting the biggest slide in business equipment demand in three years, according to figures released yesterday by the Commerce Department in Washington.

China's Shanghai and Shenzhen 300 Index yesterday slumped 9.2 percent, also from a record. It had jumped 13 percent in the previous six sessions. The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, plunged 8.8 percent, the steepest drop since Feb. 18, 1997. The rout wiped out $107.8 billion from the market value of China's companies, which had doubled in the past year.

Stocks fell after the State Council, China's highest ruling body, approved a special task force to clamp down on illegal share offerings and other banned activities in the market.

Commodities Hit

China's government has introduced several measures over the past year to calm the stock market. Banks were urged to stop lending money for stock investments and to recall outstanding loans, the China Banking Regulatory Commission said Dec. 31. The People's Bank of China, the central bank, ordered banks to boost reserves four times in the past year to reduce money available for investment.

``With capital flows being so global it's hard for action in a large country like China not to have an effect on other markets,'' said Amanda Smith, who helps manage $6 billion at ING New Zealand Ltd. in Auckland.

BHP, the world's biggest mining company by market value and production, lost 5 percent to A$27.40. Fiscal first-half sales to China rose 36 percent to $4 billion from a year earlier, the company said. Rio Tinto Group, the second-biggest by market value and third by production, dropped 3.9 percent to A$76.49. It generated 16 percent of its total sales from China in 2006.

`Worry'

``Commodities stocks are the losers because whenever something like this happens, investors worry about the implications for global growth,'' said Tom Murphy, who manages about $1 billion in Asian assets at Deutsche Bank AG in Sydney.

Posco, the world's third-largest steelmaker, slumped 4.3 percent to 356,500 won. China was the company's largest market after South Korea in 2005.

Korea Zinc Co., the world's biggest smelter of the metal, fell 3.8 percent to 90,600 won. Nippon Mining Holdings Inc., Japan's biggest copper producer, dropped 6.8 percent to 972 yen.

Toyota, Japan's largest automaker, dropped 4.1 percent to 8,000 yen. Matsushita Electric Industrial Co., the world's No. 1 maker of consumer electronics, lost 3.5 percent to 2,380 yen, while Sony Corp., the second largest, tumbled 6 percent to 6,130 yen.

The yen rose the most in more than 19 months against the dollar amid a sell-off in U.S. stocks and as investors shunned emerging-market assets, prompting an unwinding of trades betting on a decline in the Japanese currency.

The currency rose 2.3 percent to 117.93 against the dollar late in New York yesterday, the biggest gain since July 2005. It was little changed at 118.15 recently.

China ADRs Slump

``China's drop yesterday shocked risk-money investors, as did the yen's climb,'' said Mitsushige Akino, who oversees about $468 million in assets at Ichiyoshi Investment Management Co. in Tokyo. ``Stocks should fall across the board.''

China Mobile's ADRs fell 10 percent to $44.16 in New York. Its Hong Kong-traded stock yesterday slipped 2.9 percent to HK$74.90. ADRs of China Life Insurance Co., the country's biggest life insurer, fell 8.8 percent to $38.48. The stock fell 3.8 percent to HK$21.65 in Hong Kong yesterday and lost 9 percent to 33.89 yuan on the mainland.

Brilliance China Automotive Holdings Ltd., the Chinese partner of Bayerische Motoren Werke AG, tumbled 12 percent to $24.30 in New York. The stock fell 6.9 percent in Hong Kong yesterday.

Hong Kong's Hang Seng Index yesterday lost 1.8 percent. The Hang Seng China Enterprises Index, which tracks the so-called H shares of 37 mainland companies, fell 3.1 percent.

``It's not just a one-day drop,'' said Andy Mantel, managing director of Pacific Sun Investment Management in Hong Kong. ``There's more room in the downside. My strategy is to increase in cash and shorts.''

China stocks open down but quickly recover

China's main stock index opened lower on Wednesday but recovered quickly and moved into positive territory as heavily weighted financial blue chips climbed.

The benchmark Shanghai Composite Index (.SSEC: Quote, Profile, Research) opened down 1.34 percent, but after five minutes stood 1.18 percent higher at 2,804.454 points.

On Tuesday the market plunged 8.84 percent, its biggest fall in a decade, in a sell-off that jolted global financial markets.

Analysts said Chinese investors remained nervous after Tuesday's rout but recently created funds had entered the market to accumulate shares for long-term investment.

Officials denied various rumors that fueled Tuesday's tumble, including talk that China might impose a stock capital gains tax and that the head of the securities regulator might step down.

In addition, investors believe the government, which wants to list big state firms on the market this year, will not permit a collapse that could endanger those plans, traders said.

Many see good technical support for the index at the February low of 2,541, from which it bounced sharply early in the month.

"The situation is not too bad. The market should stay in a range of 2,500 to 3,000 for a while," said Zhang Qi, analyst at Haitong Securities, adding that Tuesday's drop was probably not the start of a bear market.

Black Friday at Dalal Street

Ahead of the budget next week, for the fourth straight day in running, the markets slid without support from any major quarter. It was a free fall in most counters on the back of sustained selling pressure.

Sensex nosedived below 13,600 and Nifty slipped to 3950 mark in intra-day trade. All the BSE sector indices closed in the red. Cement, pharma and banking stocks were the worst hit.

Most market analysts attributed this fall to pre-budget jitters, inflation concerns, stretched valuations, rising interest rates and profit booking across the bourses and equities. UPA Government’s assurance that more steps would be taken to tackle inflation and price rise had no positive impact on the markets.

President’s address to both houses of parliament has hinted at Finance Minister P.Chidambaram announcing these measures in the union budget later next week.

Sensex finally closed 388.78 points below at 13,632.53. It had opened firm, at 14,071.27 but began its southward journey immediately thereafter. The benchmark index kept on touching one low after another, 13, 568.08 being the last one.

The S&P CNX Nifty lost 101.05 points to 3,938.95. The total turnover on BSE amounted to Rs 4039 crore.

The market-breadth, which reflects the overall health of the broader market, was very weak. There were 5.4 losers for every gainer on BSE. A host of stocks from the small-cap and mid-cap space were being heavily sold. Against 2,207 shares declining on BSE, just 411 advanced. Only 36 scrips remained unchanged.

Among the 30-Sensex pack, only 1 advanced while the rest declined. In NSE, there were 102 advances and 944 declines.

Among the sectoral indices, banking stocks plunged 3.42 per cent, FMCG stocks plunged 3.35 per cent, telecom stocks fell 3.22 per cent and pharma stocks were down 2.65 per cent.

The major market movers on NSE were Gail which gained 1.80 per cent to Rs 277; Tata Steel rose 0.95 per cent to Rs 459, Suzlon Energy advanced 0.75 per cent to Rs 1,048, Reliance rose 0.53 per cent to Rs 1,419.50 and GSK Pharma rose 0.53 per cent to Rs 1,165.

The major NSE losers were Oriental Bank which declined 7.10 per cent to Rs 199; Jet Airways fell 6.38 per cent to Rs 639; Bharti Airtel was down 6.34 per cent to Rs 750; Grasim fell 5.99 per cent to Rs 2,276 and ITC fell 4.96 per cent to Rs 165.80.

Atlanta Ltd plunged 10 per cent to Rs 972.70 after Sebi barred the founders and some other investors from trading in shares of the company on charges of unfair trade practices.

Bombay Rayon Fashions Ltd fell 5 per cent to Rs 192.50 after its board approved acquiring 70 per cent stake in UK-based DPJ Clothing Ltd for 1.54 million pound sterling.

Sterlite Optical Technologies declined 6.1 per cent to Rs 177.90 after receiving contracts for INR 1.5 billion from Power Grid Corporation of India.

Power Finance Corporation moved higher and was trading at Rs 113.10 on BSE, a premium over the IPO price of Rs 85. The stock debuted at Rs 104; hit a low of Rs 103.50, and a high of Rs 117. Volumes in the stock were huge, at 2.67 crore shares.

The wholesale price index rose 6.63 per cent in the 12 months to 10 February, lower than the previous week's annual increase of 6.73 per cent due to a fall in some food and textile prices, data showed on Friday (23 February).

As per provisional data, FIIs were net sellers to the tune of Rs 435 crore on Thursday (22 February 2007), the day when the Sensex lost 167 points. FIIs were net sellers to the tune of Rs 348 crore in index-based futures on the same day. They were net sellers to the tune of Rs 104 crore in individual stock futures. Nifty March futures settled at 4066.65 on Thursday, a premium of 26.65 points over the spot Nifty closing of 4,040.

Revised market lots in NSE's derivatives segment become applicable today. The lot size of the Nifty contract has been cut to 50 from 100. This may boost volumes in the derivatives segment.

US blue-chip stocks declined on Thursday, as a jump in oil prices added to worries about inflation, but a rally in chipmakers' stocks helped the Nasdaq advance late in the session to end at a six-year high.

The Dow Jones industrial average fell 52.39 points or 0.41 per cent, to end at 12,686.02, with only eight of the 30 stocks in the Dow finishing higher. The Standard & Poor's 500 Index dipped 1.25 points or 0.09 per cent, to finish at 1,456.38. The Nasdaq Composite Index rose 6.52 points or 0.26 per cent, to 2,524.94, its highest close since 15 February 2001. Earlier, the Nasdaq hit a six-year intraday high at 2, 531.42.

US crude shed 9 cents to 60.86 a barrel after jumping 88 cents overnight to its highest level since 2 January 2007.

2-day fall 7th highest since ’03

The two-day fall in benchmark indices has sent jitters among several market participants. The current fall is the biggest one after the crash in May this year. The 572-point fall in Sensex is the seventh highest, in terms of points, since the beginning of the bull run in April 2003. And in percentage terms, the fall is 4.1%. There have been 20 bigger falls than the latest Sensex crash.

The biggest continuous fall was five-day long. But, it may be extended further after a brief pullback, which may last only for one trading session. Usually, this pullback will be very weak. There have been five such five-day continuous falls since April 2003.

The biggest such fall shaved off 17.2% from the Sensex. This happened in May 2004 when the ruling party was toppled and the Congress-led UPA took control at the Centre.

Big falls occur when there are key concerns such as ripe valuations and political hurdles. RBI’s decision to raise the cash reserve ratio of banks may have been the key trigger for the latest fall. At roughly 17 times the one-year forward earnings, domestic equities are among the most expensive in emerging markets.

This is the only major correction in December since the beginning of the bull run. December has always been a month where markets have ended on a positive note. Historical data shows that Sensex has ended in the negative territory only 5 times in the previous 27 years.

FIIs have been at the centre of every major market correction. In the previous few market sessions, FIIs have sold around Rs 2,000 crore of stocks, both in the cash and futures & options segment. Normally, indices pull back at least one-third of their losses. Market watchers feel there is lot of money waiting on the sidelines, so this correction could turn out to be a short-lived one.

Lalit Thakkar, director, Angel Broking, says, “We are not seeing it as a significant correction like the one witnessed in May this year. What happened in May was a global correction and that is why the recovery was slower.”

Technical chartist Vijay Bhambwani feels, “Indices are exhibiting a “long pole” formation on intra-day charts as the steep fall resembles a pole due to the vertical fall of nearly 3%. While the 3913-point support in Nifty advocated for Monday’s session did not hold, the bearish pressure was significant and seems to be placing the extremely short-term oscillators in the near oversold zone. That indicates a short pull-back rally, though the same can terminate without a warning and therefore maybe very treacherous to trade.”

1,000 points down the drain in three days

In merely three sessions the Sensex has lost 977.01 points, the sharpest fall after June 2006.

Then, the Sensex had tumbled 1,521.89 points, from 10,451.33 on 2 June to 8,929.44 on 14 June 2006.

The last such major fall was in July 2006, when the Sensex had lost 922.75 points; from 10,930.09 on 12 July to 10,007.34 on 19 July.

A massive fall had occurred in May, when the Sensex had lost 1,736.04 points to 10,481.77 on 22 May from 12,217.81 on 17 May. A lower-than-expected industrial output growth for October 2006 worsened the fall on the bourses today, after the Sensex had lost 400 points on Monday (11 December) following a surprise hike in cash reserve ratio (CRR) by the RBI, which raised fears of another rate hike.

The latest sharp fall will help reduce some of the excesses of Indian bourses like stretched valuations. The Indian bourses are trading at high PE multiple compared to its regional and emerging market peers. The premium valuations it commanded because of strong earnings growth of India Inc as on 11 December 2006, the Sensex’s PE multiple was 22.18 based on the trailing 12-month September 2006 earnings. The PE multiple will fall further following today’s 404-point fall.

The latest sharp fall has occurred after a sharp surge, when the Sensex had risen 10.6% in a short while, to a lifetime closing high of 13,972.03 on 7 December, from 12,623.28 on 23 October. FII buying, on expectations that earnings growth of India Inc will continue, had triggered the solid surge. There was a surge in open interest in NSE’s futures & options segment during this rally, indicating that the market was overbought.

After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so given that strong earnings growth has been a key driver of the bull-run on the bourses.

In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today, and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.

Market men will also be watching FII allocations for India for calendar year 2007

Close: A full blooded correction ! finally !

Market plunged down into the negative cage right from the start despite positive global cues. There were some signs of recovery at mid day but heavy selling in the final trading hour again pushed the market into deep red. It was the highest loss in a day after May 18. This weakness was largely attributed to the RBI's surprise move to increase the CRR by 50 basis points. Banking, Steel , Cement stocks were the major losers while selling activity was witnessed across almost all the sectors. The global scenario however was positive with both Asian markets and European markets traded in green.

Sensex closed down by 400 points at 13399.43. Weighing on the Sensex were losses in SBI (1242.75,-8 percent), ICICI Bk (819.4,-7 percent), ACC (1036.2,-6 percent), TISCO (453.4,-6 percent) and NTPC (142.85,-6 percent). It was a full blooded correction and the speed of fall has instilled fear which kept away the buyers.

Banking stocks draghed down the market, State Bank of India (SBI), the country's largest bank today raised interest rates on domestic term deposits by 0.25% in a move that could compel other commercial banks to revise their deposit rates as well, while commercial banks have seen lending rise by more than 30 per cent, deposit growth has been only at over 18 per cent. In such circumstances, a hike in deposit rates can draw resources into the banking system to feed the demand for loans. The banking stocks saw panic selling on the CRR (cash reserve ratio hike by 50 basis Major Stocks were down like BOI down by 11%, SBI down by 8.88% and Canara bank by 7.7%.

Zee Tele slipped drastically after the news reported that leading sports broadcaster ESPN Star Sports had won the ICC telecast rights for yje eight-year period starting 2007. Industry estimates that ESPN Star's bid was at $1.1 billion followed by Nimbus at $900 million, Zee ($850 million) and Tensports ($825 millon). Besides the 2011 and 2015 World Cups, the rights will cover ICC's major tournaments such as Champion's Trophy in 2008, 2010, 2012 and 2014, Twenty20 World Cup, Women's World Cup and Intercontinental Cup. Some initial sentimental negatives for ZEE but if we see the broader aspect, a huge investment for a game whose viewership is declining and to recover this investment is unlikely to be an easy job. ESPN Star is targetting to $ 2.7 billion from this contract but that is easier said than done. Zee Tele ended down by (-8.43%) while other peers were also down.

Steel sector was down with the market and the major loser include Tata Steel. As per a leading business daily, the company had revised upwards its bid for the Anglo-Dutch steel maker Corus to US$ 9.2 bn to head off a potential counter bid from Brazil's CSN. Under the revised bid, the new cash offer would be 500 pence per Corus share from the earlier 455 pence per share. The Brazilian steel maker however counter bid some hours later at 515 pence in cash for each Corus share. This fight continues.. We would prbably favour if Tisco lets go.. but surely they have their economics and calculations in place. HIgher price entails a bigger weight on the balance sheet. Avoid Tisco for long was our suggestion. The stock however ended the day down by 7%.

Technically speaking: Overall market was in red and ended the same. Volumes were at 4830 cr. The breadth has been in favor of Decliners as they were at 1974 while Advances at 589. The Resistance was at 13570 while Support at 13200 levels.

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.