Indices melt on fears of government action on stock manipulators

22 September 2005

Finally, it happened! The much awaited correction in the markets after weeks of one way up move unfortunately turned out to be meltdown. Rumours about the government, SEBI and exchanges making things harder for manipulators led to nervousness and all round selling.

The morning saw the financial media full of reports about the government taking strong action against erring brokers and other market players. The prime minister's office was reported to have held a meeting in which even the intelligence agencies were present. Though these reports were denied later in the day, they were enough to make markets nervous.

The markets opened on a marginally weak note before recovering and the Sensex went duly past the 8500 mark once again. After trading sideways for more than half an hour, the indices started their fall which lasted the rest of the day.

Reports of raids by income tax officials at the offices of some smaller brokers accelerated the fall in early afternoon trades. Every attempt at recovery led to more selling pressure and the frontline indices went into a free fall.

The last half-hour saw the Sensex trading more than 300 points down from yesterday's closing at 8186 and the Nifty more than 100 points down at 2466. The severity of the fall was such that not even a single stock among the 30-Sensex stocks or the 50-Nifty stocks managed to close with gains. Only 22 stocks closed with gains on the NSE while more than 800 closed with losses.

Sensex closed at 8221, a loss of 266 points, and the Nifty at 2477, a loss of 90 points. Nifty September futures closed at a discount of 6 points to the spot index.