Biggest Intra-Day bear run on SENSEX

Yerterday, the benchmark Sensex plummeted by about 10 per cent within minutes of opening, forcing a one-hour trading halt for the third time in the history, but recovered smartly following clarifications from the finance minister and SEBI and buying interest from domestic institutions.

On late October 16, Securities and Exchange Board of India’s (Sebi’s) announced restricting participatory notes (PNs), which are used by foreign institutional investors (FIIs), to invest anonymously in India. PNs have been considered instrumental in a 5,000-point surge in the Sensex this year. Sebi has estimated that they now account for a little over half of FII inflows from about a fifth in 2004. Both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) had been open for three minutes before circuit triggers were breached, forcing trading to be suspended.

However the market recovered smartly following clarifications from Finance Minister P Chidambaram that the proposals were aimed at moderating capital inflows into the country. He said that Sebi’s step was good for the capital markets and investors adding that investments through PNs were welcome if registered as by FIIs.

Later in the afternoon, Sebi also clarified that FIIs can roll over derivative exposures through PNs up to 18 months.