Reading Article
Bubbly Sensex tumbles
When market regular Sebi put out a draft note on Tuesday night with a proposal to control Participatory Notes it was obvious the markets would react badly when it opened on Wednesday. What was not obvious was the viciousness with which the indices would temple. Afew minutes after the stock markets opened for trading, the Sensex lsta staggering 1,744 points the most it ever had in its history.
It was the kind of number that pushed the index to hit the lower circuit and shutters were pulled on trading for a hour. By the end of the day, investors were poorer by an eye popping Rs 1 lakh crore. In the interim,foreign fund managers had pulled out a record $1.7 billion out of the system in a single trading session.
The damage could have been worse had FM P chidambaram and Sebi chief M damodaran not frayed tempers. They told investors they were only trying to limit dollar inflows, and not ban PNs. The assurances was met with relief and investors resumed buying. At close, the Sensx ended at 18,716 down just 336 points over its previous close on Tuesday. P-Notes are like certificates issued by FIIs to their clients who want to remain anonymous, but enjoy all the benefits of an investor owning share. Sebi’s stated objective of clamping down on this instrument was that it wanted to encourage direct investment in the market.