Unwinding continues to take its toll
Holders of participatory notes (PNs), mainly hedge funds, are running out of patience. Unwilling to wait until October 25 when Sebi finalises its PN guidelines, they continued unwinding their positions both in the derivatives and cash market for the third consecutive day. As a result, the 30-share Sensex of the BSE has plunged 1,491.88 points, or 7.83%, since the markets regulator announced its proposed PN restrictions on Tuesday. The Sensex ended the week with its highest-ever weekly loss in CY 2007 of 859.06 points, or 4.66%.
On Friday, the benchmark index moved in the range of 805.59 points, before closing the day at 17,559.98 points, down 438.41 points or 2.44%. Even RIL?s impressive second-quarter results could not change the sentiment on the bourses, already reeling under heavy selling pressure. RIL closed the day at Rs 2,469.20, losing Rs 106.70 or 4.14%. The broader S&P CNX Nifty of the NSE ended the day at 5,215.30 points, down 2.54% or 135.7 points.
According to dealers, sentiment has taken such a severe beating that even the encouraging news that inflation had dropped to a five-year low could not help. Headline inflation based on the Wholesale Price Index reported 3.07% growth for the week ended October 6, lower than the previous week?s 3.26%.
Manish Sonthalia, VP, market strategist & portfolio manager, Motilal Oswal securities, said, ?The market has almost reached its bottom level and another bout of selling will give a good buying opportunity for investors. However, until October 25, the market may possibly be under selling pressure because of the PN issue. IT stocks are one of the few good buys on the market right now as their second-quarter results were in line with expectations and had been under-performers in the last few months.?
Dealers said since the day the markets regulator proposed measures to curb foreign inflows through the PN route, FIIs had turned net sellers, cumulatively in both cash and derivatives segments. At the time of going to press, provisional data from the stock exchanges was not released on Friday.