An undercurrent of panic and uncertainty over the future entry of Participatory Notes battered the Sensex which swung over 800 points intra-day and closed down 438.41 points at 17,559. The Nifty closed down 135.70 points at 5215.30 on Friday. There was extreme volatility in the market and in the early afternoon the Sensex nosedived by over 635 points to its lowest in the last two weeks.
The market breadth showed the extent of selling as there were only 161 stocks that ended in the green and 1,023 stocks in the red. Foreign institutional investors (FIIs) who were holding PNotes continued to sell despite the assurances of finance minister P. Chidambaram and the Securities and Exchange Board of India (Sebi) that there would not be a total ban on PNotes. It was only sought to be regulated through registrations. However, the selling was not a bottomless pit, said Mr Nipun Mehta, director and CEO of Unitis Tower Wealth Advisors. There were buyers giving support at lower levels.
Sebi whole-time member G. Anantharaman said it will accommodate all FIIs, but without any "back door" entry. Speaking to reporters on the sidelines of the Investment Advisory Conclave, he said that feedback on the PNotes proposal was pouring in and they would be examined by Sebi officials. He said the final decision would be taken on October 25 and it would be for the good of the market.
Most market participants and leading bankers like Deepak Parekh of HDFC have welcomed the Sebi proposals and said it would lead to a healthier market. There is a view that the strong PNotes lobby is trying to bring pressure on the finance ministry and Sebi to dilute the proposals. There is already talk of extending the time of 18 months for winding down the PNotes portfolios. The turnover on both the exchanges was lower than usual at Rs 1,14,198 with the F&O sector accounting for Rs 83,102 crores. The cash markets continued to benefit from the PNotes crisis as those who hold PNotes can still buy them.
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