Sensex lost 241.37 points, or 1.69%, to close at 14,060.66 points. The broader S&P CNX Nifty of National Stock Exchange (NSE) ended the day at 4,270.30 points, down 48.15 points, or 1.11%.
Domestic markets opened on a negative note following mixed cues from global markets. Markets bounced back intra-day on reports that the government has drawn up several proposals to populate an ambitious reform agenda. During the final hours of trading, markets lost the ground as huge selling took place in heavyweights.
The Volatility Index (Vix) of NSE gained 14.98% on Tuesday, but on Wednesday the index lost as much as 12.58%. Dealers in the market say there was huge buying in the mid- and small-cap indices in the last two trading sessions which shows that once again retail investors are returning to the market.
Ambareesh Baliga, vice president of Karvy Stock Broking, said, I dont think that despite the markets surging ahead, things have changed at the ground level. We expect some tough measures from the government in the forthcoming budget so that we can see decent growth in next five years. I dont think anything has changed fundamentally and we can witness some amount of corrections in the market in the coming days.
Dealers in the market say the market is overbought and some corrections will take place, before more clarity emerges on the new governments proposed plans for economic reform. After many days, foreign institutional investors (FII) stopped their buying and on Wednesday they were net sellers at Rs 985.53 crore, as per provisional figures furnished by BSE. FIIs were sitting on the sidelines in the last few weeks, but now they have come in the market. However, once the picture is clear regarding the formation of the new government, we might witness more inflows from the FII, added Baliga.
Among the BSE sectoral indices, Bankex and Oil & Gas were poor performers while Metal and Consumer Durables (CD) ended at the top of the table. The breadth of the market remained strong as out of 2,735 stocks traded on BSE, 2,393 stocks advanced, 298 stocks declined while the remaining 44 stocks were unchanged. In Sensex, 16 stocks closed in green and 14 stocks closed the day in red.