The markets have closed lower for a fourth straight week suggesting a deep rooted correction has set in. The Sensex fell 182 points to 19,137 and the Nifty declined 48 points to 5,752 in trade today.
This week, the markets were rocked by the realty funding scam. Banking and realty stocks crashed after the CBI arrested top officials of the banking industry for collusion with developers and middlemen. Reports also indicated that SEBI was initiating a probe against insider trading though the finance minister has denied this.
For the week (all provisional), the Sensex fell 2.51 per cent and the Nifty registered a 2.63 downfall. IT stocks rose 2.1 per cent. All other sectors ended in the red with the steepest cuts coming from realty stocks that declined 13.2 per cent. HCL Tech rose 3.5 per cent in the week while Suzlon and JP Associates fell 13 per cent.
Most analysts believe that the scam has been blown out of proportion. Shankar Sharma of First Global said that the loan scam was being blown out of proportion and it was a "bribery scandal at the most."
Analysts were also worried that scams hit a discordant note with FIIs and if they started pulling out money from emerging markets, the situation could worsen.
Today's trade was marked with volatility. The markets opened with modest gains but a broad based sell off that start with realty stocks took the Sensex to below 19,000 levels. Shankar Sharma of First Global said, "The selloff was triggered by margin calls." However, the markets recovered from the day's low but another round of selling pressure towards the day close sent the benchmark indices close to 1 per cent lower.
Realty stocks were the worst hit. While some stocks were hit by the realty scam, others fell from a rub-off effect. Ackruti City, Orbit Corp and Indiabulls Real Estate fell 11-13 per cent. DB Realty was locked up in trade after it fell 9.99 per cent the moment the markets opened. Sharma said that realty sector has fundamental problems. "The sector is overvalued and stocks can fall to 2008 levels. Issues such as funding, accounting and corporate governance also plague the sector," he added.
Other sectors that saw deep cuts included metals (down 2.54 per cent), oil and gas (down 1.36 per cent) and auto (down 1.89 per cent).
Banking stocks surprisingly did better and closed with minor downside. IDBI fell 5.06 per cent. PNB fell 2.81 per cent. The CBI had arrested one of the Bank's GM for involvement in the scam.
Stocks named by the CBI in the realty funding scam had a free fall.
LIC Housing Finance closed with 11.91 per cent loss. The company's board is meeting next week after its CEO was arrested for involvement in the scam.
Money Matters was locked up after falling 9.99 per cent. The company's board is holding an emergency meeting today.
Other stocks to decline included: Jaiprakash Associates (8.04 per cent), HCC (18.88 per cent, the stock was also affected by the environment ministry's show cause notice to its Lavasa project), BGR Energy (12.40 per cent), Suzlon (4.16 per cent), Ashapura Minechem (9.46 per cent) and Adani Enterprises (16.99 per cent).
Selling was also seen in small cap and midcap counters, with the latter declining 4.49 per cent.
The market breadth remained weak with only 16 per cent stocks advancing on the BSE. On the Sensex, only 6 stocks advanced. TCS was the top gainer, rising 2.14 per cent. Cipla, SBI and Tata Power rose between 1-2 per cent.
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