Sensex tumbles, more losses seen

Ranjit Gangadharan

MUMBAI: India's benchmark Bombay share index tumbled more than three per cent

on Wednesday as last week's interest rate rise by the Reserve Bank of India

continued to weaken sentiment after an exodus of foreign investors.

The index finished 3.34 per cent lower at 4,191.27 points. It contrasted with

a 1.41 per cent rise in the Hang Seng Index, a 0.91 per cent fall in the

Singapore's Strait Times Index and a 0.43 per cent decline in Japan's Nikkei 225

Index.

The fall wiped out Tuesday's 3.53 per cent recovery, which was largely

triggered by local speculative bidding as fears of political unrest faded after

a local court dismissed a seven-year-old case against the Shiv Sena leader Bal

Thackeray.

The short-lived nature of the recovery suggested that the market may not have

bottomed out, said Kaji and Maulik Securities director Maulik Sharedalal.

The bourse has been weighed by sustained selling by foreign funds

reallocating cash to other regions which offered better returns, and rising

domestic interest rate concerns.

Foreign funds



Foreign institutional investors were net sellers of $334.6 million during the
period July 1-25, following negative outflows of $230.7 million in June,

according to data released by the Securities and Exchange Board of India.

In the previous five months, the foreign funds had made net purchases of

$1.67 billion. The Reserve Bank of India raised the key bank rate by one

percentage point to 8.0 per cent on Friday and hiked the cash reserve ratio of

banks by 50 basis points to 8.5 per cent to support a wobbly rupee.

The rupee ended firmer at 44.85/86 against the dollar on Wednesday compared

to 44.895/91 on Tuesday. It hit a record-low of 45.075 last Friday, down 3.3 per

cent since the end of March.

"The short term trend is clearly down," said institutional sales

dealer at Motilal Oswal Securities Govind Agarwal.

The benchmark index had plunged 19.9 per cent in eight trading sessions to an

intra-day low of 4,052.61 on Tuesday from an intra-day high of 5,058.90 on July

13.

"What happened today does not bode well for a pull back in the near

term," Sharedalal said.

If the market pulled off a recovery it would be mainly technical in nature

and would meet significant resistance at 4,430-4,460 points, he said.

Leading losers were software services firms Infosys Technologies, down 7.98

per cent at Rs 6,608.25, Satyam Computer Services down 10.59 per cent at Rs

2,339.05 and Wipro eight per cent weaker at Rs 2,415.90.

Pentamedia Graphics declined 12.08 percent to Rs 415.80.

Volatility offers good bargains



Analysts said the volatile markets offered an opportunity for investors to pick
bargains.

"This is an absolutely great time to pick up shares," said

Millennium Capital Management Private Ltd managing director Mahesh Gandhi.

"I am going to fill up my bucket when I see good value buys," he

said, adding he saw bargains in the pharmaceuticals and technology sectors.

(C) Reuters Limited 2000.