Markets cave into IPO black hole

Equity markets took yet another beating. Weak global cues, rationalisation of holdings and a liquidity squeeze following fund diversion from the secondary market to the IPO market, among other reasons, caused the Sensex of the Bombay Stock Exchange to lose 687.12 points, or 3.49%. In its fourth-steepest fall ever in terms of absolute points, the 30-share benchmark index closed the last trading day of the week at 19,013.70 points. The Sensex has lost 1,813.75 points, or 8.71%, in the past week.

Written by Markets Bureau

January 19, 2008 00:51 IST

Equity markets took yet another beating on Friday. Weak global cues, rationalisation of holdings and a liquidity squeeze following fund diversion from the secondary market to the IPO market, among other reasons, caused the Sensex of the Bombay Stock Exchange (BSE) to lose 687.12 points, or 3.49%.

In its fourth-steepest fall ever in terms of absolute points, the 30-share benchmark index closed the last trading day of the week at 19,013.70 points. The Sensex has lost 1,813.75 points, or 8.71%, in the past week.

The S&P CNX Nifty of the National Stock Exchange (NSE) ended the day at 5,705.30 points, losing 3.52%, or 207.9 points. Nifty January futures closed at 5,730.35 points, commanding a premium of 25.05 points, which market experts attributed to a sharp fall in prices in the cash segment of the stock market.

Ramdeo Agarwal, managing director of Motilal Oswal Securities Ltd, said, ?Optimism about making huge profits in IPOs is prompting retail investors to withdrew money from the secondary market and invest in the primary market. Fears of a recession in the US is also making investors, especially foreign institutional investors, withdrew from riskier assets.?

A portfolio manager at a multinational company believes that there was rationalisation of equity portfolios, and funds are moving from areas that looked overheated into safer havens. The BSE Realty index lost 741.45 points, or 5.81%, and the BSE Bankex slid 598.73 points, or 5%.

These two sectors, along with some Reliance Group companies, witnessed huge sustained buying. The gainers belonged to the cement and pharmaceuticals industries, which are tipped for steady earnings growth.

Broad-based selling led to a weak market breadth, with 2,505 stocks on the BSE ending in the red, compared to 362 stocks that closed higher. The BSE Small-cap index lost 579.84 points, or 4.55%, to end at 12160.45 points, while the BSE Mid-cap index closed at 8,893.71 points, losing 446.30 points, or 4.78%. Among the Sensex pack, 24 declined while six manage to advance.

According to provisional figures provided by the stock exchanges, FIIs were net sellers to the tune of Rs 2,146.92 crore.

This article was first uploaded on January nineteen, twenty eight, at fifty-one minutes past twelve in the am.