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Bloodbath on Dalal St.
Shiv Kumar
Tribune News Service

Minutes after trading began, the Sensex plunged to a low of 17,307.90, down a huge 1,744 points. Officials had to stop trading for one hour. It, however, recovered from P-note jitters to close at over 18K.

Mumbai, October 17
The Sensex staged a dramatic recovery from a 1700-point deep fall in the opening hours after Finance Minister P Chidambaram quickly moved in to calm the fears of investors following a shocker by the Security Exchange Board of India that it would ban investment in the bourses via participatory notes.

Both the Sensex and the Nifty hit the circuit breakers shortly after opening as investors headed for the exit doors following overnight announcement by SEBI that the regulator was considering a crack down on investment via PNs. The Sensex tailspin took it down to 17,307 levels while the Nifty slumped to a low of 5,107 levels. Later the Sensex recovered to close at 18,715 points, down 336 points while the NIFTY ended at 5,559 levels, down 1.9 per cent. The meltdown forced the markets to shut for nearly an hour.

The morning's panic was triggered by a proposal by the market regulator to curb FIIs from issuing offshore derivative instruments. SEBI has suggested that FIIs to wind up their current positions over the next 18 months. SEBI's crackdown came from fears that thousands of crores of rupees in accounted money were entering the economy via the P-note route. Most of the recent rally in the stock market has been attributed to inflows via P-Notes.

However Finance Minister P Chidambaram defended the decision by SEBI staying the measure was aimed to moderate capital flows. "It is important to moderate capital flows. This is one of the steps in that direction. There is no reason for any alarm," told reports shortly after the meltdown. "The decision is a result of a long discussion between SEBI, RBI and the government. I must make it clear that we have not banned P-Notes but have only put a cap," the finance minister added.

Today's yo-yo movement of the Sensex hammered down a number of scrips that had displayed upward movement in the past few days. Reliance Energy was down 7.5 per cent while ACC fell 5 per cent), SBI, down 5 per cent, BHEL, down 4.7 per cent, NTPC, down 4.5 per cent and Mahindra & Mahindra, down 4.2 per cent, were the main losers.

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