Sell-off continues; Sensex sheds 1868 points in 3 weeks

Bears have been in a party mood post the Diwali session, while the bulls had enjoyed their party till Diwali by taking the Sensex above 21,000 level. Equity benchmarks have seen a carnage for the third consecutive week. The housing finance scam unearthed by CBI, sell-off in global markets due to Korean fears and credit concerns in European continent have been some of the key reasons. Political instability due to 2G spectrum scam also was an added dampener and weighed heavy on the markets.

In the last three weeks, the Sensex shed 1,868.35 points and the Nifty 560.5 points from their all-time closing highs of 21,004.96 and 6,312.45 touched on Mahurat trading day, respectively.

The most important and supportive factor for the markets during this period has been inflow of money from foreign institutional investors (FIIs), which haven't participated in the selling yet. They were net sellers to the tune of just Rs 3500 crore plus post Diwali and Rs 12,000 crore in calendar 2010. However, FIIs were net buyers of nearly Rs 1.4 lakh crore in 2010.

The bribes-for-loans scam may be big domestically, but it has not dampened global sentiment as of now, says Mark Matthews of Macquarie Capital Securities. ''The FIIs are not pre-occupied with Indian scam due to global uncertainties,'' he adds. Further, he says he won't be surprised if money moves out of India.

Samir Arora of Helios Capital had all along shown controlled optimism about the markets. The ongoing bloodbath on the exchanges hasn't made him a pessimist. He maintained the correction process will get over gradually.

In this week, the markets continued downtrend for fourth consecutive day today. Heavy sell-off due to lingering impact of housing finance scam dragged Nifty below the all important technical support area of 5700 and the Sensex below 19000 mark in morning trade but in second half of trade, indices managed to show recovery due to short covering. Some gains again wiped out in last half an hour of trade due to further fall in European markets.