Market Nose dived at early trade but recover after one hour halt

Oct 17 : Trading came to a halt after market started plunging downward. Market reopens at 10.55 am on Wednesday. The trading was suspended for one hour for the first time since May 2004.

The expert says this downward plunging is due to Security and Exchange Board of India proposal. SEBI has proposed to curb participatory notes.

The market experiences a massive loss of 1500 points in early hour. Sensex was down by 8% while Nifty was down by 9%.

Bombay Stock Exchange’s Sensex drop 1743.96 points, National Stock Exchange’s Nifty slipped 524 points.

Reliance Energy was (down 17.98%), Reliance Communication (15.86%), ICICI Bank (11.82%), NTPC (11.78%), BHEL (11.72%), Reliance Industries (11.26%), ACC (11.10%), Larsen&Toubro (10.33%), HDFC Bank (10.28%) and Tata Steel (10.15%) , these stressed the market as a result the indices went lower and lower.

Market experts have forecasted a negative reaction in the market after SEBI proposal to curb FIIs from issuing off shore derivatives came on Tuesday.

SEBI on Tuesday proposed to take initiative to curb flow of foreign funds into shares through instrument known as Participatory Notes.

This will catch the surge in foreign through PNs, which are offshore derivatives instruments that allow foreign investors to invest indirectly in a country’s stock market. SEBI also gave the proposal that Foreign Institutional Investors (FII) and their Sub accounts cannot issue or renew PNS with immediate effect.

SEBI opined that this move will stabilize the market and calm the rising Rupees. Since Rupees has gone 12.5 % up against Dollar this year, creating pressure on monetary policy and currency management.

Recently the market rose to a record 18000 points in just 7 trading season, with further reaching to 19000 in just four trading season.

During these quick gains in the stock markets, the FII inflows came mainly in form of PNs. The experts are concerned about such investment in Indian Market, which could be for short term gains. And once FIIs pull out their funds from Markets, there could be sharp alteration.

SEBI Chairman, M Damodaran said that proposals were against PNS but not against FIIs, summing that the procedures for registering FIIs has been simplified.

While it created furor in the market, Finance Minister P.Chidambaram said that there is no reason for any alarm. Welcoming this move by SEBI .He said that the decision is good in long-term and this move will moderate the capital inflow in the market.

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