Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
For the record - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • May 22, 2004

    For the record

    It was a week of records for the Indian bourses! Of course, it is a different thing that nobody would want to talk about these ever. The stock markets continued their southward movement this week despite the nerve-wrecking 10% fall that was witnessed last week. Weak sentiments prevailed throughout, which saw the indices close in the red with the BSE-Sensex and the NSE-Nifty losing 2.1% and 1.4% respectively. But, this is merely a 'Cinderella' end to a weeklong anguish that prevailed on Dalal Street.

    Last week's mayhem continued on the bourses this week with the first trading day (May 17) having gone down in history as 'Black Monday'! The indices, on that day, witnessed the biggest ever intra-day fall. The markets opened on a weak footing and sooner than one could have imagined, panic set in as they plunged on account of across the board selling. Within 20 minutes of start of trade on Monday, both the indices had crashed over 10% and trading was halted for one hour as the 'first' circuit breaker was triggered. This was for the first time in Indian stock market history that a circuit breaker was applied on the exchanges to control further damage.

    The carnage, however, was not over. No sooner did the trading begin after the one hour cool off period, it was again halted, this time for two hours. The second circuit breaker had been triggered as the indices had tumbled over 15%! It was absolute chaos on the bourses and the sell off was being blamed at the uncertainty with respect to the continuity of reforms owing to the new government at the Centre. Representatives of the incoming government tried their best at reining the market fall by assuring and re-assuring that the reforms would continue.

    Key gainers over the week (NSE-50)
    COMPANY Price on
    May 14 (Rs)
    Price on
    May 21 (Rs)
    H/L (Rs)
    BSE-SENSEX 5,070 4,962 -2.1% 6,250 / 3,033
    S&P CNX NIFTY 1,582 1,560 -1.4% 2,015 / 960
    TISCO 289 329 13.6% 490 / 141
    TATA TEA 314 348 10.9% 420 / 190
    TATA CHEMICALS 118 129 9.8% 189 / 66
    MTNL 116 126 9.1% 166 / 92
    MARUTI 427 463 8.4% 602 / 156

    While selling by hedge funds and unwinding of positions by Foreign Institutional Investors (FIIs) seemed to be the key reason for the fall, Securities and Exchange Board of India (SEBI) numbers painted a different picture. While data of hedge funds activity is not available, FIIs were net sellers merely to the tune of Rs 636 m (see chart above). Even the domestic mutual funds (MFs) could not have effected such a massive fall as they had purchased equity worth over Rs 3 bn on that ill-fated day. Thus, the primary culprits causing the fall are not yet known. Rumours of NSE making margin sales have also been put to rest with the exchange having made a statement denying the same. Though SEBI has initiated an enquiry into this, the report is still awaited.

    Key losers over the week (NSE-50)
    COMPANY Price on
    May 14 (Rs)
    Price on
    May 21 (Rs)
    H/L (Rs)
    REL. ENERGY 647 522 -19.4% 818 / 214
    VSNL 142 128 -9.8% 210 / 80
    BHEL 502 453 -9.7% 685 / 220
    GLAXO 642 580 -9.6% 709 / 342
    TATA POWER 323 293 -9.2% 450 / 127

    However, Tuesday was a different day altogether as the indices opened firm on the back of bargain hunting at lower levels, taking advantage of the irrational behaviour displayed by the markets the previous day. News of Sonia Gandhi backing out from the post of the Prime Minister and Dr. Manmohan Singh, who is acclaimed as the 'architect' of Indian reforms, tipped to be the PM enthused market participants. Exuberance was witnessed on the bourses as value buying saw the indices record one of the biggest gains of over 8%. The buying continued well into Wednesday as re-assurances from the new government kept trickling in with respect to the continuation of reforms. However, Thursday and the first-half of trading on Friday saw investors take some money off the table, before some late buying on the final trading day of the week saw the indices turn positive.

    With the dreadful week behind us now, it is important for investors to understand that what has caused this weakness on the bourses. Why has suddenly the India shining story lost its glow? Is it only the uncertainty with respect to reforms that has caused this turmoil in the Indian stock markets or is there something more that is being over-looked? It must be noted that markets across Asia had tumbled in the region of about 9%-10% within a span of a couple of weeks before some stability set in during the last couple of trading sessions. FIIs have pulled out money across emerging markets with estimates ranging around US$ 5 bn in the month of May alone. Indian markets have witnessed a net FII outflow of approximately US$ 700 m in the current month.

    While there is a common belief amongst investors that it is primarily the political factor that has led to the fall, we believe that it is not just politics. We would like to conclude this weekly roundup here with an extract from one of our previous articles, "There are several other factors playing very important roles in determining the pace of global economic growth and, consequently, returns for investors in equities. However, while factors like political uncertainty are more likely to have a medium-term effect, others like terrorism and interest rate rise are likely to have long-term bearing. In that case, a staggered and a long-term strategy is most likely to be successful in providing investors with adequate returns on their investment. However, in these times of high levels of political uncertainty, we advise investors to practice a wait and watch policy and do not fall prey to the overall chaos." Happy Investing!



    Equitymaster requests your view! Post a comment on "For the record". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Why Hasn't Warren Buffett Rung the Bell Yet? (The 5 Minute Wrapup)

    Aug 22, 2017

    It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.

    Think Twice Before You Keep Money In A Savings Bank Account (Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    A Darkness Is Spreading Across the US (Vivek Kaul's Diary)

    Aug 22, 2017

    Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working (Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 23, 2017 09:59 AM