Fears of a recession coupled with huge selling by foreign institutional investors (FIIs) dragged key indices for a second day in a row on Thursday. The 30-share Sensex of the Bombay Stock Exchange (BSE) closed lower by 398.20 points or 3.92%, ending the day at 9,771.70 points. The broader Nifty of the National Stock Exchange also fell below the 3,000-mark for the first time since July 2006, and closed at 2,943.15 points, down by 122 points or 3.98%.
The Sensex opened the day with negative gap on the back of weak cues from Asian as well as European markets. The benchmark index opened at 9,683 points and touched an intra-day high of 10,260.55 points and fell to a low of 9,681.28 points. Inflation came down to 11.07% from 11.44% in the previous week.
The markets had recovered sharply after inflation figures poured in and the finance minister announcing that Securities and Exchange Board of India had asked FIIs to reverse short positions on borrowed shares. However, the recovery soon fizzled out.
Anita Gandhi, head of institutional business at Arihant Capital Markets, said, ?We have been witnessing huge selling from FIIs and I think they are in a mood to withdraw money for few more weeks. The Reserve Bank of India has been quite aggressive in infusing liquidity. But we have to see what they offer on the credit policy day.?
Barring consumer durables and capital goods, all other sectors on the BSE ended the day in the red, with metals and auto being the worst performers. As per provisional data provided by the BSE, FIIs were net sellers at Rs 811.69 crore while domestic institutional investors were net buyers at Rs 619.91 crore.
?The extreme volatility witnessed on Thursday probably indicates that the market is near its bottom,? said an analyst from a leading broking house.