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Domestic buying, Manmohan magic lift markets
Priya Ganapati in Mumbai | May 17, 2004 14:32 IST
Last Updated: May 17, 2004 16:33 IST
As trading was about to resume after being halted twice earlier in the day, brokers expected the worst to continue. However, the BSE Sensex has begun to rise slowly and at 1415 IST the fall had been stemmed to around 360 points, a rapid recovery of over 470 points.
After an unprecedented crash that wiped out about Rs 300,000 crore in market capitalisation, the stock market on Monday recovered substantially within an hour of resumption of suspended trading, after Congress leader Manmohan Singh and possible finance minister, warned of tough against manipulators.
The Bombay Stock Exchange had fallen nearly 800 points since the start of trading earlier in the day and brokers were expecting the bloodbath to continue.
Dealers say that domestic institutional buying by organisations like the Life Insurance Corporation of India and the Unit Trust of India is propping up the market now.
Traditionally, the domestic institutions have always stepped in during times of crisis on the stock markets and especially to help stem crashes.
Concerned over the mayhem at the market which went into a free fall before trading was frozen twice for three hours, the first time in BSE history, Singh stepped in and promised pro-growth tax and foreign direct investment policies.
Recommencement of trading at 1315 hours gave a soothing touch to investors as outgoing finance minister Jaswant Singh put the market on alert and activated the Securities Exchange Board of India and the Reserve Bank after Singh talked to him on phone.
The recovery in the market came with domestic financial institutions, mostly government-owned, went on a buying spree to rebuild the confidence of investors, who were estimated to have lost about Rs 3 lakh crore before the freeze as market went into a tizzy over apprehensions on the continuity of economic reforms, policies and divestment.
Expressing concern over decline in the stock market, Jaswant Singh said uncertainty and lack of confidence among the investors had caused the crash but hoped that market would stabilise in next few hours.
Pivotal stocks like Reliance, Reliance Energy, ACC, Maruti and Infosys have witnessed buying. Buying, however, is not actively happening across the board.
Dealers also say that a few foreign investors are trawling the market to cherry-pick good stocks.
"The fundamentals for the stocks have not changed. So we are seeing a few investors looking for good bargains currently. However, the bulk of the buying is coming from domestic institutions," says a dealer.
Despite the current recovery, dealers say that the worst is not over.
"There is only that much that buying by domestic institutions can help. If overall sentiment is very negative, then this buying won't help a crash. We will have to wait and watch to see what happens over the next few days," says the dealer.
Additional inputs: PTI
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