Why the Sensex fell over 400 points

The Indian stock market plunged in the last leg of trade on Thursday due to wide spread sell-off in the broader markets.

The Sensex fell 433 points, to 19,263 and the Nifty slumped 127 points, to 5776 (provisional).

Broader markets were beaten down badly on margin deficit selling and recent furore by Sebi on stock price rigging.

There was also the fear of foreign funds withdrawing money from the stock market.

The midcap index plunged 4.3% and smallcap index was off 6%. Alex Mathews, Research Head, Geojit BNP Paribas Financial Services said, "selling pressure in broader market stocks may continue because they have lost major technical support.The rebound may happen only after one or two weeks."

Inflation numbers continued to play spoilsport on the Indian markets. Food price index rose 8.69%, while the fuel price index climbed 9.99% year on year for November 27. RBI Deputy Governor said that commodity prices will make inflation management difficult.

Apart from the selling pressure and the high food inflation numbers, two other things impacted the markets very heavily.

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The spat between Rajya Sabha MP and former BPL chairman Rajeev Chandrasekhar and Tata Sons chairman Ratan Tata is getting worse and now it reaches personal level.

Chandrasekhar had said that the Tatas have been benefited due to the flip-flop policies in connivance with the people in government and Ratan Tata has refuted this.

In another development, Reserve Bank of India Governor D Subbarao warned of a liquidity crunch in the system and said that government schemes that are sucking the cash from the system.

Meanwhile, Telecom Minister Kapil Sibal on Thursday termed as 'unfortunate' the war of words between operators and cautioned that such practices were not healthy for the growth of the sector.

Asked to comment on operators accusing each other for being favoured by the government in spectrum allocation, he said such discourses in the public domain should be avoided.

"What I find today is very unfortunate, some operators are at war with others. This is because at any given point of time they felt that they had been discriminated against," he said.

However, he ensured a level-playing-field for all the telecom service providers going forward.

When asked about Tata Sons chairman Ratan Tata accusing Bharatiya Janata Party-led National Democratic Alliance regime for policy flip-flops in telecom sector, Sibal said: "I guess he (Ratan Tata) must be making that statement with some kind of knowledge and information. I cannot comment on that."

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The minister, however, did not lose an opportunity to make a point saying that may be the reason why the Opposition, which has been demanding a JPC probe into the 2G issue and has disrupted Parliament proceedings and does not want a debate on it.

Ratan Tata on Thursday said that many of the flip-flops in the telecom policies occurred during the BJP regime.

Tatas were accused by Rajya Sabha member and former BPL chairman Rajeev Chandrasekhar for not being transparent and being one of the biggest beneficiaries of the government telecom policy.

Tata has noted that the government auditor the Comptroller and Auditor General has not ascribed any value to 48 new GSM licences issued to incumbents during 2004-2008 and 65 mhz of additional spectrum.

The Sensex opened in the red and remained in the negative hobbled by global uncertainties and thin volumes as the year approaches end. The Sensex had fallen over 500 points in intra-day trading.

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Consumer Durables index dipped sharply, down 6.2%. Gitanjali Gems dipped 20%. VIP Industries slumped 10%, and Titan Industries plunged 6.4%.

Realty and auto shares were also under pressure, down 3.4% each. Sunteck Realty lost 20%, Ackruti City fell 8.9% and Orbit Corporation declined 5.7%. From the auto space, Amtek auto dipped 13%, Ashok Leyland and Exide industries was down 5.4% each.

IT index emerged as a defensive bet and managed to hold the gains. Wipro and Infosys surged almost 1% each.

Reliance Communication was the top loser on Sensex, down 6.1%, Cipla dipped 5.3% and Hindalco declined 4.5%. Only 3 components on the Sensex were trading in the red Infosys, Wipro and ITC.

From the broader market space midcap index dipped 4.2%, smallcap index also dropped over 5% on margin deficit selling and recent furore by SEBI on stock price rigging.

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