Market at End of the day: Stock Market ends with little losses after Initial Big Jolt

The market ended with modest loss after initial jolt. Securities & Exchange Board of India (Sebi) Chairman M Damodaran assured that participatory notes (PNs) are not being banned. The market had earlier recovered after Finance Minister's comments that there is no proposal to ban participatory notes. Earlier the market regulator Sebi's proposals to clamp down participatory notes to restrict foreign inflows, announced after trading hours on Tuesday, 16 October 2007, created havoc on the bourses today. Trading was halted just within minutes of opening, as index wide circuit filters were triggered by the steep fall. European markets were in the green.

IT stocks edged higher. Metal, realty, banking stocks declined heavily. Reliance Industries gained ground, with the stock staging a solid rebound from lower level. Reliance Energy recovered from lower level. Most of the Sensex stocks recovered from their lower levels after an initial setback. Asian markets were mixed. Market breadth was weak.

The BSE 30-share Sensex provisionally ended down 391.19 points, or 2.05%, to 18,660.67. It opened with a downward gap of 1,013.96 points at 18,037.90. When the trading was halted at 09:57 IST, Sensex was down 1,743.96 points or 9.15% to 17,307.90.

In afternoon, Securities & Exchange Board of India (Sebi) Chairman, M Damodaran, clarified to television media that participatory notes (PN) are not being banned and there will be no bar on FII inflows. But it is important to differentiate between PN underlyings, he added. He said that 18 months for unwinding will be enough and during this time, serious investors can register themselves. PNs can be renewed post unwinding the equal amount. Sebi is looking at encouraging more FII registrations and therefore it may look at simpler FII registration norms. He also clarified that Sebi is not proposing a ban on offshore derivatives.

India's largest private company in terms of market capitalization and oil refiner Reliance Industries (RIL) rose 1.94% to Rs 2,699.70. The stock came off session's low of Rs 2,278.60. Volume in the stock was a huge 37.65 lakh shares on BSE.

Reliance Energy (REL) declined 8.06% to Rs 1,751 and was the top loser from Sensex pack. It recovered sharply from session's low of Rs 1,532 in afternoon trade. Reliance Energy's net profit jumped 34.17% to Rs 250.08 crore on 13.65% rise in total Income to Rs 1799.92 crore in Q2 September 2007 over Q2 September 2006. REL announced the results today during the market hours today. ACC (down 5.42% to Rs 1,195) , Bharat Heavy Electricals (down 5.25% to Rs 2,269.90) and NTPC (down 5.15% to Rs 219.35) were the major losers from Sensex pack. Larsen & Toubro was down 0.75% to Rs 3,320. It recovered sharply from session's low of Rs 3,000. BSE Metal index was the biggest loser from sectoral indices on BSE. Tata Steel (down 4.39% to Rs 867.25), Steel Authority of India (down 2.24% to Rs 246.40), Hindalco Industries (down 0.03% to Rs 197.50) edged lower.

Realty shares dropped. DLF (down 2.52% to Rs 895.40), Indiabulls Real Estate (down 3.86% to Rs 578.80) and Unitech (down 4.07% to Rs 339.30) edged lower. Banking stocks declined but recovered from lower levels. ICICI Bank down 2.96% to Rs 1,122.50. It recovered from session's low of Rs 1,012.15. HDFC Bank (down 3.42% to Rs 1,453.10) and State Bank of India (down 5.53% to Rs 1,818) edged lower. Buying was witnessed in IT stocks at lower level. BSE IT index was the lone gainer from sectoral indices on BSE. TCS (up 2.45% to Rs 1,094.30 ), Infosys (up 0.44% to Rs 1,876.50) , Satyam Computer Services (up 1.8% to Rs 458) edged higher. Wipro was down 0.07% to Rs 485.90.

Finance Minister P Chidambaram said on Wednesday, 17 October 2007, the proposals to moderate portfolio investment by foreign investors were part of a series of steps to moderate capital inflows. Chidambaram told a news conference that foreign investors were still welcome to invest in India through participatory notes but it was important to moderate inflows at present and the decision was good for markets in the long term.

After market hours on Tuesday, 16 October 2007, market regulator Securities & Exchange Board of India (Sebi) proposed a number of restrictions that will effectively spell doom for the thriving participatory note (PN) activity in the stock market. All this was done to slam brakes on the flows of anonymous foreign capital. 

PNs are financial instruments used by investors or hedge funds that are not registered with Sebi, to invest in Indian shares. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with these securities as the underlying.

Once the Sebi proposals are operationalized, only FIIs whose outstanding notes do not exceed 40% of their total asset holding in India will be allowed to issue fresh ones. For instruments already issued by FII sub-accounts, Sebi has given a window of 18 months to wind up existing positions. As per reports, the notional value of investments through PN's route grew almost ten times to Rs 3.53 lakh crore at the end of August 2007 from just Rs 31, 875 crore three years ago. There are a total of 1,113 FIIs registered with the Securities & Exchange Board of India (Sebi) as on 15 October 2007.