After another day of equity markets awash in red, finally some good news. In a surprise development late on Tuesday, the US Federal Reserve announced a 75-basis point rate cut?one of its largest ever?which analysts said would buoy domestic sentiment and may help markets recover on Wednesday, although there are still leveraged positions to be unwound.
The Fed?s announcement couldn?t have come at a better time. It just took one minute from opening for the BSE Sensex to hit the 10% lower circuit on Tuesday, as the after effects of Manic Monday continued into Torrid Tuesday and many were calling the bourse?s locality Halal Street.
Weakening sentiment worldwide fuelled the selling pressure. The Sensex witnessed an intra-day plunge of 2,272.93 points and the S&P CNX Nifty of the NSE dropped 760 points intra-day, before correcting at the fag end of their sessions, mainly on the back of positive openings in European markets and some short covering at lower levels.
The Sensex finally closed at 16,729.94 points, posting its second-steepest fall of 875.41 points, or 4.97%. The Nifty posted a loss of 309.5 points, or 5.94%. But the Indian market was not the only one reeling under the super sell-off. Japan?s Nikkei fell 5.65% while the Shanghai Composite Index fell 7.22%.
Dealers said margin pressures aggravated the downside and in many cases, brokers sold on behalf of their clients. Vikas Khemani, co-head-institutional equity, Edelweiss Capital, said, ?A genuine liquidity crisis was witnessed in the markets and clients unwound positions to comply with margin calls.?
Across-the-board selling made the overall market breadth bleak with only 152 stocks on the BSE advancing as against 2,273 stocks which declined and 29 stocks remaining unchanged. All sectoral indices were down in the 3.5-10% range, while the BSE Small and Mid Cap indices were down by around 8% each.
Provisional data indicated that FIIs were net sellers to the tune of Rs 4,265.19 crore, while domestic institutions were net buyers worth Rs 2,778.71 crore on Tuesday.
The NSE quashed rumours that stock exchanges had liquidated member positions and sealed trading platforms due to margin non-compliance. However, market regulator Sebi held an internal meeting with exchange officials on margin collection and other surveillance-related matters. The sources said senior Sebi officials also held a review meeting with their counterparts at RBI.
