Sensex major crashes by 746.40 pts during the week

Mumbai, Mar 3 (UNI) The BSE Sensex shrunk below the psychological level of 13,000, to settle at 12,886.13 with a major loss by 746.40 points for the week ended March 2, 2007, compared with the previous week's closing of 13,632.53.

The market declined amid high volatility. Before the market could overcome the pre-Budget blues, a disappointing Union Budget 2007-08 and weak Asian markets pushed the market lower.

Similarly, the S&P CNX Nifty index of NSE also lost 212.20 points, to finish at 3726.75 compared with the previous week's closing at 3,938.95.

The BSE Mid-Cap shed 198.65 points for the week ended March 2, 2007, to settle at 5,466.24 compared with the previous week's closing of 5,664.89. The BSE Small-Cap shed 258.62 points, to close at 6,645.81, compared to the previous week's closing at 6,904.43.

On Monday, the day of the Railway Budget, the 30 shares BSE Sensex advanced 16.99 points (0.12 per cent), to close at 13,649.52.

However, the market experienced volatility and swung 1,000 points, between some of the vital intra-day tops and bottoms of the day. The market pulled off an almost incredible rebound after a steep intra-day fall in mid-afternoon trade. Cement, banking, auto and steel shares were behind the Sensex's rebound. The rise in cement and steel shares was due to a cut in rail freight rate on key raw materials in their manufacture.

On Tuesday, the 30 shares BSE Sensex lost 170.69 points (1.2 per cent), to 13,478.83 on weak Asian markets. Nevertheless, select stocks edged up in a weak market, as investors bet on sector specific Budget sops.

On Wednesday, the day of the Union Budget, the 30 shares BSE Sensex tumbled 540.74 points, to settle at 12,938.09 on heavy selling across the board. Sensex suffered their biggest fall in eight months after June 13, 2006. Increase in taxes for cement, IT and construction firms and weak global markets caused the huge fall on the bourses.

An increase in dividend distribution tax impacted trading on the bourses, and the market tumbled soon after the announcement. The dividend distribution tax for corporates has been raised to 15 per cent from 12.5 per cent. No changes have been made in corporate tax.

The 10 per cent surcharge for firms with a taxable income of Rs 1 crore, or less, has been removed. The market was expecting abolition of 10 per cent surcharge for all corporates.

On the flip side, there is no increase in the securities transaction tax (STT), on short-term capital gain tax and on long-term capital gains tax on sale of shares. Long-term capital gains tax remains zero. The market also expected an increase in STT.

Marketmen also had apprehension of an increase in short-term capital gains tax to 12.5- 15 per cent from 10 per cent.

The Sensex, which had been on a downtrend ever since striking an all-time high (14,723.88) on February 9, 2007, rebounded with great force on March 1, 2007. Bargain-hunting for battered index pivotals and short-covering in the derivatives segment helped to reverse the downtrend. Most of the gains came in the second half of the day's trading session, triggered by short-covering.

Volatility was also at its best,sub-brokers said.

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