Our Bureau

Mumbai , Sept. 22

NERVOUS jitters over the pace of the bull-run, emanating from the corridors of regulators, finally hit the markets today, with stock prices across the board succumbing to panic selling.

After the minor roadblock on Wednesday, where the Sensex recorded an intra-day drop of 235 points before recovering to close with a loss of only 13 points, markets plunged to a free fall on Thursday.

The Sensex, which slipped below 8200, intra-day, closed with a loss of 265.50 points at 8221.64.

The Nifty also traded in the red all day on Thursday, losing a whopping 3.54 per cent to close at 2476.5, down 90.8 points from Wednesday.

Almost every second scrip traded hit the lower circuit; a record 1,314 scrips were locked at the lower circuit on BSE today.

As the markets began trade this morning, several triggers led to a shaky opening.

Media reports about Government investigations into the movement of several small and mid-cap stocks triggered panic in these counters.

There were further reports that income tax officials were raiding the offices of several brokers in Gujarat, even as trading was on. The effects of Hurricane Rita were also not to be discounted by the market and concerns of oil prices flaring up again led to investors hitting the `sell' button.

Though corrections were expected for the last 1500-point rise in the Sensex, the pace at which it occurred today took many in the market by surprise.

"This was bound to happen, but no one expected the speed at which it happened. Selling started in the mid-cap counters and then moved across the market. FIIs which had sold Nifty futures on Wednesday reversed the trend today and started selling stocks. This led to further panic," said Mr Roop Chand Betala, Betala Stock Broking Ltd.

Market experts feel that the downturn triggered today could set the market on a volatile mode for the next few months.

While the inflection point for the markets to turn confidently bullish again could vary — corporate earning and FDI in retail are some of the events cited — the sentiment is that the days of unilateral upward movement of the market are over for now.

"There have been excesses in the market, especially in the small and mid-cap counters. Value correction after the run-up of 1500 points is welcome, but a gradual and orderly correction would have been more suitable. Markets, from here on, would be volatile for the next few months.

"Only money that can withstand this volatility should be invested now," said Mr Ved Prakash Chaturvedi, Chief Executive Officer, Tata Asset Management Ltd.

Though there were no official statements, sources at the Securities and Exchange Board of India said they were not aware of any potential settlement issues arising from today's sharp fall.

Despite the surprise at the 200-plus fall in the Sensex today, market analysts are convinced that the long-term fundamentals of the market are robust.

Every bout of correction will reset valuations in the market. There are no worries about the long term as present valuations are not overstretched, said the CIO of a large fund house.

FII liquidity, which was largely fuelling the bull-run, is slowing down. However, they were net buyers to the tune of Rs 307 crore on Wednesday.

Market experts foresee that if the markets opened weak on Friday, profit booking at 8000-plus levels would drag down stock prices.

Gold prices at all-time high

Standard gold prices in the Mumbai bullion market touched an all-time high of Rs 6,780 per 10 gram on Thursday morning following firm overseas markets along with limited local buying. It closed at Rs 6,750 per 10 gram. On November 24, 2004, standard gold reached Rs 6,735 per 10 gram.

In New York, gold prices moved up sharply to $479 per ounce in intra-day trade on heavy fund buying over Hurricane Rita.

"The reason for sharp rise in gold prices at the New York and London markets is mainly due to heavy funds buying as a safe heaven investment over another threat of natural calamity i.e. Hurricane Rita," Mr Bhargav Vaidya, a bullion analyst told Business Line.

"But local demand at current level is relatively low due to an inauspicious period i.e. `Shradh Paksha'. The market has turned volatile, since the last two days," Mr Vaidya said.

Gold prices were down nearly Rs 500 per 10 gram or 7 per cent during the current month.

Trading volume has gone down as majority dealers, refiners and banks are closely watching the market movement. Supply is comfortable, a local dealer said.

Voices

``The fall in stock prices was expected. Market is in corrective mode and it will make it healthier.'' - Motilal Oswal, Chairman, Motilal Oswal Securities

``At current levels, foreign funds do not want to chase the market. FII inflows have been reducing over the last few sessions and this is likely to continue. I view this as a smart correction.'' - Andrew Holland, Executive Vice President, DSP Merrill Lynch

``Today was a correction day. The index is always much ahead, or behind it never captures the fundamentals as they are. The rally is supposedly backed by fund flows. To raise capital based on the current scenario may not be a good idea; current prices are not reflective of what the future is going to be. Pricing should be based on oneĦs own fundamentals. One should not be greedy.'' - Anil Singhvi, Executive Director, Gujarat Ambuja

``Today, everybody came together to sell. Such a correction was needed and has come.'' - Parag Parikh, Chairman, Parag Parikh Advisory Services

``The much-awaited fall seems to be coming as there are perceptions that foreigners will start booking profits after being buyers for a long time.'' - Pareen Thakkar, dealer at Dalal and Broacha Stock Broking

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