Sensex crashes; down by 1500 points

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Mumbai, Oct 17: The BSE sensitive index today quoted below 19,000 barrier, opening a low at 18,037.90 points with a major loss around of 1,014 points from its last close of 19,051.86 points due to SEBI's proposals to clamp down participatory notes, brokers said.

'' The market regulator Securities&Exchange Board of India (Sebi)'s proposals to clamp down participatory notes to restrict foreign inflows created havoc on the bourses today. Trading was halted just within minute of opening, as index wide circuit filters were triggered by the steep fall. Asian markets were weak,'' brokers said.

When the trading this morning was halted at 09:57 hrs, the 30-shares BSE Sensex was down 1,743.96 points or 9.15 per cent (pc) to 17,307.90 in intra day trade. It opened with a downward gap of 1,013.96 points at 18,037.90 points.

The S&P CNX Nifty index of NSE was down 524.15 points or 9.25 pc to 5,143.90. The Nifty index recorded a low at 5107.30 points in intra day trade.The current index is quoted low at 5266.05 points with a big loss of 402 points from it last close of 5668.05 points.

Turnover on BSE was a mere Rs 122.02 crore when trading was halted on the bourses. It was just Rs 48 crore on NSE. NSE's futures 7 options segment had clocked a turnover of Rs 4347 crore by that time Reliance Communications was down 15.86 pc to Rs 640,followed by Reliance Energy by 17.98 pc to Rs 1,562, Reliance Industries by 11.26 pc to Rs 2,350,Tata Steel by 10.15 pc to Rs 815, ACC by 11.20 pc to Rs 1,126, Bharat Heavy Electricals by 11.72 pc to Rs 2,115, HDFC Bank by 10.28 pc to Rs 1,350 and ICICI Bank by 11.82 pc to Rs 1,020.

After market hours on Tuesday, 16 October 2007, market regulator Securities&Exchange Board of India (Sebi) proposed a number of restrictions that will effectively spell doom for the thriving participatory note (PN) activity in the stock market. All this was done to slam brakes on the flows of anonymous foreign capital. Also the volatility is expected to be intense.

PNs are financial instruments used by investors or hedge funds that are not registered with Sebi, to invest in Indian shares. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with these securities as the underlying.

The Sebi has released its report on P-note. It has suggested that FIIs should not renew or issue PNs with underlying as derivatives..

It also wants sub-accounts to not issue P-Notes.

Once the Sebi proposals are operationalised, only FIIs whose outstanding notes do not exceed 40% of their total asset holding in India will be allowed to issue fresh ones. For instruments already issued by FII sub-accounts, Sebi has given a window of 18 months to wind up existing positions.

As per reports, the notional value of investments through PN's route grew almost ten times to Rs 3.53 lakh crore at the end of August 2007 from just Rs 31, 875 crore three years ago.

Meanwhile, finance minister Palaniappan Chidambaram is expected to comment on Sebi's proposals to cap foreign fund inflows via participatory notes.

Asian markets were trading lower today as Japan's Nikkei was down 0.75 pc at 16,999.70, followed by Hong Kong's Hang Seng by 0.51 pc at 28,804.26, South Korea's Seoul Composite by 1.77 pc at 1,970.33, Singapore's Straits Times by 2.15 pc at 1,962.57 and Taiwan's Taiwan Weighted by 0.14 pc at 9,571.43.

The Dow Jones Industrial Average declined by 71.86 points or 0.51 pc at 13,912.94 on yesterday. The Nasdaq Composite slid by 16.14 points or 0.58 pc to 2,763.91 while the broad-market Standard&Poor's 500 index fell by 10.18 points or 0.66 pc to a close of 1,538.53 on last night which reflected on Indian bources, brokers added.


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