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Sensex plunges by 826 points
Tribune News Service

Mumbai, May 18
Sensex plunged a steep 826 points in the wake of a global meltdown, taking the index to 11,391 at close. In the broader markets, Nifty also fell by 6.8 per cent or 246 points to close at 3,389. Foreign institutional investors (FIIs) were the biggest sellers as they took cues from international markets to offload their holdings. Fears of higher taxes on the FIIs by the Indian Government also dampened the sentiment.

The ‘Tragic Thursday’ surpasses all previous record falls of over 560 points in May, 2004, and April, 1992. The index today settled at 11,391.43, down by 6.76 per cent from last close.

While the loss was initially confined to 600 points, Tata Steel’s below-than-expected quarterly earnings dealt a severe blow pushing the index down to the day’s low of 11,330.45 - registering an intra-day fall of 887 points.

Today’s fall was triggered by the government’s proposal to distinguish stock traders from investors for the purpose of levying tax.

The new draft guidelines distinguish shares held as stock-in-trade and shares held as investment to plug tax avoidance, particularly by FIIs — which pay only 10 per cent tax on short-term capital gains. They will have to shell out 41 per cent tax, if they are treated as traders.

Also, taking a cue from the dip in US stocks and world- wide crash in metal prices, investors rushed with frantic sell orders right from the onset of trading. Metal, cement and commodity shares plunged along with a number of blue-chip stocks as selling pressure became wide-based.

Leading the losers were ACC, which slipped by 12.1 per cent or Rs 110 at close. Hindalco, Tata Steel, Reliance Energy and Maruti Udyog also lost over 10 per cent each.

Metals were hit the worst with the BSE metal index slipping by 11.4 per cent or 1,181 points.



Manufactured crisis: FM

New Delhi, May 18
Dubbing as “manufactured crisis,” the sharpest fall in the history of stock markets, Finance Minister P. Chidambaram sought to bring back foreign funds, saying no foreign institutional investor (FII) has been assessed as a trader for tax purposes.

“No FII has been assessed as a trader as they are investors and this is a manufactured crisis based on uninformed reporting,” he told reporters shortly after the stock market closed trading today after a fall of 826 points on reports of withdrawal by the FIIs.

Calling it uninformed reporting, which led to the market crash, he said: “There is a lesson for everybody. Uninformed reporting and reaction to uninformed reporting is not a desirable thing.”

Earlier in the day, Mr Chidambaram had sought to play down the plunge saying that every movement and swing of the market did not require a comment. — PTI


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