The Sensex slipped to 4,783 on October 22, and recovered to 4,800-plus onOctober 25 and 26. Then came the baffling fall from 4,814 in threesuccessive trading sessions, by an average of 123 per day. Infotech retainsits high growth prospect. Pharma stocks are still perceived to ride high onbreakthroughs and free prices. A turnaround in cyclicals in the wake of theindustrial recovery is seen to be round the corner. There is no dearth ofgood news: the waiver of US sanctions, the accommodative credit policy ofthe Reserve Bank et al. But even good quarterly results have failed to checksales in the heavyweight Hindustan Lever stock.

There is no denying that share prices had accelerated headily, temptingprofit-taking. Foreign portfolio investors sold to skim gains, takingadvantage of the stable rupee. This is only to be expected inSeptember-October. (Remember the time when their share sales had weakenedthe rupee?) Mutual funds started buying at declining prices but, faced withunexpected selling pressure, developed second thoughts: no point in defyingthe herd! Mutual funds (especially those overweight in select stocks) toodecided to book profits and defer buying till the stock price scenariocleared up. But this line of explanation makes sense only up to a point:say, to where the sensex comes down to 4,800-4,700.

So, who hurt cock robin? The villain of the piece is said to be the BombayStock Exchange authorities (who declined to learn from the experience of theNational Stock Exchange). They put in place a new `margining' system, whichis completely different from the old one, and made it operational withimmediate effect (October 25) but without providing a road map to guidebrokers: caught unawares, many thought they were overexposed, and rushed tosell to cover their positions. (May be the market was headed towardsover-exposure). The consequent blood-letting has perhaps led to an over-correction. Hopefully, expectations will soon come to the fore.