Picture a field where horses are galloping all over. Imagine a situation when an invisible set of leashes drop from the sky and suddenly grab them all by the scruff of the neck. Envisage the tumult as the wild horses stumble, neigh and grind to an uncomfortable halt.
That is what happened at 9.55 am on Wednesday when trading was suspended in the country's premier stock markets. As panic spread among investors across the country, Finance Minister P Chidambaram addressed reporters amid a chilly autumn breeze outside the North Block to cool the air, mixing caution with focus in words that soothed the market. It was not before afternoon that the market found itself stirring from the freeze.
The BSE's 30-share Sensex shed over 1,744 points in the opening minute of the trading hour, triggering the lower circuit filter and trading was suspended for an hour.
Such a halt has happened only twice in the past - on May 17, 2004 and May 22, 2006.
The market was in the grip of fears that the participatory notes (PNs) will be phased out, if not banned altogether, causing FII inflows to dry up. The trigger came from Securities and Exchange Board of India (Sebi) proposal on Tuesday evening to impose some restrictions on flow of foreign funds through Participatory Notes (PNs) in the course of 18 months.
Chidamabaram assured that PNs will not be banned, even as he described SEBI's action as a step in the right direction. He said only a cap will be imposed on PNs.
This helped the market regain its confidence and cover its losses to close with a net loss of 336 points at 18,715.82.
FII inflows have two components – one, through their own portfolio of investments and the other is manking investment on behalf of others.
“Even valuations are good at the moment. But the discomfort comes from all kinds of stocks galloping with the market,” Sekhar said.Mumbai