M A I N   N E W S

Bloodbath on the bourses in Dalal Street

Sensex loses 564 points
Shiv Kumar
Tribune News Service

Mumbai, May 17
A bloody Monday at the Bombay Stock Exchange ( BSE) saw its 30-share sensitive index plunged more than 800 points to an intra-day low of 4227 points, wiping out nearly Rs 3,00,000 crore of investors’ wealth before tough-talking politicians arrested the fall.

The stock markets went on a free fall within minutes of the start of the trading session on Monday. The Sensex opening at 49 points lower at 5,021shed 356 points by 10.15 am when the BSE authorities suspended trading for an hour.

Trading opened for only three minutes when the plunge resumed and the Sensex touched 4227 points forcing another suspension in trading. Tough talking by outgoing Finance Minister Jaswant Singh of the BJP and Dr. Manmohan Singh of the Congress, tipped to take over as the new Finance Minister, saw the markets steady higher and close at 4505 points, a fall of 564 points from the previous close.

The S&P CNX Nifty, too, dropped 194 points or 12.46 per cent to close at 1388.75.

The scene outside the bustling narrow old Mumbai street was one of frustration as shell-shocked investors shouted slogans against the Congress-led alliance that was poised to take power in New Delhi.

“Sonia Gandhi hai hai. The Congress and Communists are anti-market,” the brokers shouted while BSE officials and the regulatory authorities worked behind the scenes to cool sentiments. A few of them called the journalists to come to the stock exchange Tuesday morning to film them committing suicide.

Brokers said foreign institutional investors were selling in a big way after Communist leaders spoke against the privatisation programmes and demanded the abolishing of the Disinvestment Ministry. “Ms Sonia Gandhi is going to let the Communists ruin the country like they ruined West Bengal,” screamed broker Amit Shah. “Can’t you see their statements are causing the FIIs to pull out. All major companies like the ONGC and petroleum companies have fallen,” screamed another broker. Shortly afterwards, the BSE authorities called in the police to clear the place of the brokers and journalists.

The trading community was soon assured that the government might crack down on market manipulators. The statements by Mr Jaswant Singh and Mr Manmohan Singh asking for SEBI and the Reserve Bank of India to get tough had the intended effect and a semblance of normalcy returned to the bourses.

According to the brokers, the politicians’ tough talk was matched by financial institutions like the Unit Trust of India and the Life Insurance Corporation of India mopping up stocks in a big way.

A few of them told the journalists that the situation might continue to be pessimistic as the cash-strapped brokers might default on commitments and force a payment crisis in the stock markets.

The Reserve Bank also moved to temper market sentiments and offered to provide banks with liquidity to meet their payment obligations.

“The RBI is closely monitoring developments in the stock market and was ready to provide liquidity to the banks for meeting all their payment obligations, including any intra-day requirements,” the central bank said in a statement.

The RBI further said it would continue to sell dollars through agent banks to augment supply in the market or would intervene directly to meet any demand-supply imbalances. All transactions by the RBI would be at the prevailing market rates, the central bank said.

The few saner voices in the business, however, warned investors to wait and watch before panicking. “We should wait for the Congress to form the Cabinet and state its policies before panicking,” O. Vijayan, CEO, JM Mutual Funds, told media outlets here.

Among the biggest losers were the ONGC which fell 12.84 per cent to close at Rs 630, the SBI falling 13.18 per cent to close at Rs 447. BHEL slumped 20.32 per cent to Rs 398 and MTNL was down 7.71 per cent at Rs 107. Reliance dropped 15.35 per cent to close at Rs 404.

Infosys plunged 10.92 per cent to Rs 4,527 and Wipro tanked 18.36 per cent to Rs 1,262 and Satyam fell 5.95 per cent to Rs 293. HDFC Bank fell 20.63 per cent to Rs 286. Reliance Energy plunged 25.55 per cent to Rs 477 and Tata Power dropped 19 per cent to Rs 262.

Manmohan warns manipulators
Gaurav Choudhury
Tribune News Service

New Delhi, May 17
The stock markets went into the worst-ever tailspin in the history of the Indian bourses even as the Congress stepped in to stem the slide by promising strong punitive measures against manipulators for triggering the crash.

Uncertainty over economic policies that will be pursued by the new government combined with a general downslide in the other emerging Asian markets and a continuous increase in the global crude oil prices sent the markets into a tizzy as soon as it opened after the weekend break in the morning today.

Dr Manmohan Singh, who is most likely to take over the next Finance Minister, stepped to in restore confidence among investors promising strong action against manipulators.

“We are not in the government, we do not have the details but if there is any evidence we will take actions against those who seek to manipulate the market. They have to take the responsibility”, Dr Manmohan Singh said.

He also said policies of the new government would be “pro-growth, pro-savings and pro-employment.”

“Fiscal and other policies will seek to create a favourable climates for enterprise, both Indian and foreign. There will be transparency and stability in all policies”, he said.

On the contentious issue of disinvestment and privatisation of public sector undertakings, he indicated that the government would not be against privatisation per se.

“Where it is called for, it will be done. We are for it on a selective basis”, he said.

Dr Manmohan Singh received a call from outgoing Finance Minister Jaswant Singh who urged the RBI and SEBI to exercise caution.

“I have discussed it with SEBI and the RBI. Although I do not have any authority, my advice is to be cautious”, Mr Jaswant Singh said even as he attributed the plunge in the markets to uncertainty and dipping confidence.

“If a responsible leader who aspires to join the government makes statement, it will have an effect on the market sentiments”, he said.

Mr Jaswant Singh, however, evaded a direct answer on whether foreign institutional investors (FIIs) were manipulating the market.

“I will be extremely cautious in comment on this issue. We have a healthy market and our economic fundamentals continue to remain strong”, he said.

Dr Manmohan Singh said he did speak to the outgoing Finance Minister. “I have spoken to Jaswant Singh and share with him my concern over market developments”, he said, while making the statement on behalf of the United Progressive Alliance (UPA).

The Left parties, on the other hand, put the blame squarely on “rightist forces” for the market crash in the wake of the change of guard at the Centre.

“I wish to say this is a deliberate attempt on part of the rightist forces to create a scare” CPI General Secretary A B Bardhan said.

At the same time, Mr Bardhan, said the new government “are for stability and stable economic policies that help the country’s poorest of the poor.”

CPI (M) leader Nilotpal Basu attributed the market crash to “influence” of the FIIs and a “bear cartel: who are hammering down the prices” “There is no direct link of the fall in the sensex with the fundamental economic structure of the country”, Mr Basu said, adding that there would be a comprehensive inquiry into the phenomenon.

If the market was behaving in the manner that it was because of the NDA’s defeat, then it was unfortunate and the Left parties would not be held responsible for this, Mr Basu said.

The BJP, however, attacked the Left parties for making “outlandish” statements leading to the crash and dismissed charges of manipulation as irresponsible.

“I would have reacted if anyone responsible had made the allegation.. those who understand the management of the economy would not have made such charges. It is sad that such people should be in the management of the economy”, outgoing Commerce Minister Arun Jaitley told newspersons.