Introduction of mini derivative (futures & options) contracts

NATIONAL STOCK EXCHANGE OF INDIA LIMITED

FUTURES & OPTIONS SEGMENT

CIRCULAR

Date: December 28, 2007

Circular No. NSE/F&O/120/2007

Download No: NSE/F&O/9983

Dear Members,

Introduction of mini derivative (futures & options) contracts

on S&P CNX Nifty Index

Further to circular no. NSE/F&O/118/2007 dated December 27, 2007, members are advised to note that mini derivative (futures and options) contracts on S&P CNX Nifty index will be introduced for trading in F&O segment w.e.f. January 1, 2008.

The contract specification for mini derivative (futures and options) contracts on S&P CNX Nifty index are provided at Annexure 1. The applicable lot size for these contracts shall be informed through a separate circular to be issued on December 31, 2007 after market hours.

The new contracts will be available for trading from January 1, 2008. Members are requested to take the latest contract.gz, security.gz and fo_participant.gz files from NSE EXTRANET, directory:/faoftp/faocommon before commencing trading on January 1, 2008. A detailed list of new contracts introduced for trading (file name:CONTRACT31122007.CSV) will be available on the path faoftp/faocommon/Contracts on December 31, 2007 after market hours.

For any clarifications, members are advised to contact the following officials:

Mr. Arvind Goyal, Mr. Janardhan Gujaran and Mr. Sachin Dhar at 26598151 / 26598152.

For and on behalf of

National Stock Exchange of India Limited

Suprabhat Lala

Asst. Vice President

Annexure 1

Contract specification for mini contracts on S&P CNX Nifty index

Parameter	Index Options	Index Futures
Underlying	S&P CNX Nifty index	S&P CNX Nifty index
Instrument	OPTIDX	FUTIDX
Underlying symbol	MINIFTY	MINIFTY
Expiry Date	DD-MMM-YYYY	DD-MMM-YYYY
Option Type	CE / PE	-
Trading Cycle	3 month trading cycle - the near month (one), the next month (two) and the far month (three)	3 month trading cycle - the near month (one), the next month (two) and the far month (three)
Expiry Day	Last Thursday of the expiry month. If the last Thursday is a trading holiday, then the expiry day is the previous trading day.	Last Thursday of the expiry month. If the last Thursday is a trading holiday, then the expiry day is the previous trading day.
Strike price	As applicable to existing index contracts	-
Strike Price Intervals	As applicable to existing index contracts	-
Permitted Lot Size	Based on contract value of atleast Rs 1 lac at the time of introduction	Based on contract value of atleast Rs 1 lac at the time of introduction
Expiry day	Last Thursday of the expiry month or the previous trading day if the last Thursday is a trading holiday	Last Thursday of the expiry month or the previous trading day if the last Thursday is a trading holiday
Settlement basis	Cash settlement	Cash settlement
Style of option	European	-
Price Steps	Rs.0.05	Rs.0.05
Operating Range	Upper Operating Range + 99% of base price or Rs.20, whichever is higher; Lower Operating Range Rs.0.05	10% of base price on either side
Quantity freeze	As applicable to existing index contracts	As applicable to existing index contracts

Reliance Power seeks SEBI nod for early allotment to QIBs

MUMBAI: At a time when liquidity is of primary importance Reliance Power has proposed to make available $10 billion to institutional investors for the secondary market. According to a source, the company has written a letter to the Securities and Exchange Board of India (SEBI) on Wednesday to allow them to make an early allotment of equity shares to qualified institutional buyers (QIBs). If allowed, the move will see refunds of over Rs 40,000 crore making its way to other investment avenues.

However, SEBI sources said it will not be approved since it is anti-retail investor. “Why should only QIBs be given the chance to take advantage of the recovery in the market. Reliance may be doing it just to ensure that the QIBs don’t back out,” said a source with the stock market regulator.

The QIB portion of the recently-concluded public issue was subscribed nearly 83 times with a little less than 500 entities submitting their bids. The total value of bids was pegged at Rs 5,08,486 crore. As institutional investors are required to pay 10% upfront, Rs 50,848 crore has already been collected as against the QIB portion of Rs 6,156 crore.

BGR Energy to replace Cambridge Solutions on BSE-500 index

MUMBAI: BGR Energy Systems will replace Cambridge Solutions on the BSE-500 index from February 1, according to the Bombay Stock Exchange. In a circular, BSE also said iGate Global Solutions will be excluded from the BSE small-cap index from January 28. The company is being excluded on account of discontinuation of trading and delisting pursuant to the SEBI guidelines. Besides, iGate will be excluded from the S&P CNX 500 index on the National Stock Exchange, another circular said. The BSE-500 index represents nearly 93 per cent of the total market capitalisation on Bombay Stock Exchange and represents all 20 major industries of the economy. Info Edge (India) will replace iGate Global in the index from January 28.

Volatility grips market; Sensex ends 2% lower

MUMBAI: Key indices ended an extremely volatile session of trade on a negative note. Second rung shares were beaten down badly. Among sectors, metals took the sharpest knock, followed by power and capital goods.

Bombay Stock Exchange’s Sensex settled at provisional 17,209.33, down 2.19 per cent or 384.74 points, sliding from an intra-day high of 18,185.10. The low was 17,070.05.

National Stock Exchange’s Nifty provisionally ended 3.24 per cent or 168.45 points lower at 5034.95. Intra-day, the index swung between a high of 5357.20 and low of 4995.80.

Equities began trade sharply higher, extending Wednesday’s gains, taking cues from rise in global markets. Early gains in real estate, energy and FMCG heavyweights added over two per cent to the benchmarks.

Soon after, equities came off the highs of the day as traders booked profits at higher levels. Mid- and small-cap stocks led the declines, while most blue chips managed to hold gains.

By noon, selling pressure intensified shaving nearly 3 per cent off the benchmarks. People used the morning’s rise to unwind long positions in futures and options contracts. Also, brokers were not executing trades for clients unable to make upfront payments, resulting in very little fresh buying.

Towards the fag end of the session frontline shares recovered partial losses tracking the rise in European markets. Sentiment in Europe turned optimistic after traders of credit-default swaps said the risk of European companies defaulting on their debt fell today. The FTSE was up 3.31 per cent, the DAX added 4.94 per cent and the CAC rose 3.9 per cent

Biggest index losers were Reliance Energy (down 9.18%), NTPC (9.03%), Hindalco Industries (6.19%), Larsen & Toubro (5.84%) and ONGC (5.03%)

HDFC (up 3.27%), Satyam Computer (1.78%), Reliance Communications (1.27%), ACC (1.13%) and State Bank of India (1.11%) were the major gainers.

The BSE Mid-cap and Small-cap Index ended 3.03 per cent and 3.85 per cent respectively.

Gujarat Narmada Valley Fertilizers Company (down 12.07%), Lanco Infra (11.62%), Birla Corporation (11.26%), Bank of India (11.01%), Bombay Dyeing (10.73%) and Hindustan Zinc (10.29%) topped the list of mid-cap losers.

Market breadth on BSE showed 2,333 declines against 385 advances, while on NSE 1,003 shares declined and 213 advanced.

Battered stocks rise 15-99%

The investors who gobbled equity shares when they were being battered on January 22, saw the value of these shares appreciate anywhere between 15 and 99 per cent on account of recovery in the last two days.

The price of 858 stocks appreciated by over 15 per cent from Tuesday’s intra-day low levels on the Bombay Stock Exchange (BSE). Of these, 38 stocks gained more than 50 per cent and 196 stocks appreciated between 30 and 50 per cent.

For instance, Ansal Infrastructure, Lanco Infrastructure, Reliance Natural Resources (RNRL), Edelweiss Capital, Essar Oil and Rajesh Exports gained over 70 per cent from their intra-day lows.

The total market capitalisation of actively-traded stocks on the BSE gained Rs 10,65,021 crore from its intra-day low of Rs 48,27,685 crore to Rs 58,92,706 crore. Price in Rs Jan-22 Low Jan-23 Close % Chg Ansal Infra 146.1 290.8 99 Lanco Infra 285.0 563.5 98 RNRL 75.0 139.5 86 Edelw Cap 620.0 1113.0 80 Essar Oil 105.0 185.0 76 Rajesh Exp 427.2 729.5 71 Bby Rayon 185.0 313.9 70 Adlabs 666.0 1129.6 70 Aptech 139.0 235.0 69 Triveni Engg 81.1 136.0 68

The BSE Sensex bounced back by 14.8 per cent (2,261.65 points) from Tuesday’s intra-day low of 15,332.42 to close at 17,594.07 on Wednesday. The index, which lost 5,874.35 points from its all-time high of 21,206.77, has retraced 39 per cent of its total losses.

The NSE Nifty recovered 17 per cent from Tuesday’s low, while the BSE mid-cap index bounced back by 19 per cent and the small-cap index by 9 per cent.

The market price of Ansal Infrastructure has almost doubled, appreciating by 99 per cent from the intra-day low of Rs 146.05 on January 22 to close at Rs 290.75 on Wednesday. Lanco Infrastructure gained 98 per cent to touch Rs 563.45 (Rs 285), followed by RNRL (86 per cent to Rs 139.45) and Edelweiss Capital (80 per cent to Rs 1,112.95).

The BSE Realty index, Metal index, Oil & Gas index and Power index gained more than 21 per cent each from their lows, while the Capital goods, Bankex, Auto and Consumer goods index appreciated between 15 and 18 per cent.

The power sector was the largest gainer in percentage terms as it bounced back by 37 per cent. This was followed by media, entertainment and broking companies (35 per cent each), steel and retailing (34 per cent each) and sugar and construction (30 per cent each).

The market capitalisation of banking and refineries sectors recovered by over Rs 100,000 crore each, that of information technology, oil exploration and non-banking finance companies rose between Rs 35,000 crore and Rs 70,000 crore on Wednesday.

Uncertainty remains as markets rise

Mumbai: Indian markets rose Wednesday, but foreign investors still sold more stocks than they bought and another foreign finance firm downgraded India citing valuations that cannot be justified.

Riding on improved global sentiment after the US Federal Reserve’s 75 basis points rate cut, India’s bellwether stock index Sensex rebounded strongly on Wednesday, ending its seven-day, 4,097.51 points, or 19.67%, losing streak, but brokerages, particularly foreign ones, are still not convinced that bulls are back on the Dalal Street.

The Sensex gained a record 1,267 points before closing at 17,594.07, adding 864.13 points, or 5.17%, to Tuesday’s close. However, going by provisional data from the Bombay Stock Exchange, foreign institutional investors (FIIs) were net sellers of equities to the tune of $766 million (Rs3,021.54 crore) in the cash market on Wednesday.

Strong Recovery (Graphic)

Top 10 Leaps (Graphic)

This means foreign investors, the main drivers of the Indian market, are still selling stocks to tide over their liquidity crunch. In 2007, FIIs bought a record $17.2 billion worth of Indian stocks. According to Bloomberg data, till 22 January, FIIs were net sellers of equities worth more than $2 billion.

Meanwhile, Credit Suisse Securities (India) Pvt. Ltd has joined JP Morgan Securities in downgrading India. In a 23 January report, Credit Suisse’s analysts Nilesh Jasani and Arya Sen said Indian stocks are overvalued and shifted India to underweight in their Asia portfolio.

“Our Sensex target for December 2008 is 16,500. However, the house view is that the valuations cannot be fully justified even at 13,000 levels,” said Jasani, head of equity research at Credit Suisse Securities.

On Monday, Adrian Mowat, the chief equity strategist of JP Morgan Securities in Asia, downgraded India, and according to Sunil Garg, head of Asian equity research at the firm, this was because of the “high valuations of Indian stocks.”

Both JP Morgan Securities (Asia Pac) Ltd, an arm of US-based JP Morgan Chase Bank NA and Credit Suisse Securities (India) Pvt. Ltd, an arm of Swiss-bank Credit Suisse, are highly underweight on India, even after the Sensex lost heavily since 10 January when the index hit its lifetime high.

However, all foreign firms are not speaking the same language. Deutsche Bank AG’s Hong Kong-based equity strategist Pratik Gupta said long term investors should capitalize on this sharp correction and that the Sensex’s current valuations are “attractive”.

Most of the domestic funds, too, do not share Credit Suisse’s view on Indian markets. “There is renewed confidence in the market,” said A. Balasubramanian, who manages more than $3 billion worth Indian equities as chief investment officer at Birla Sunlife AMC. “Outstanding positions have been squared off. With the Fed rate cut and the liquidity sucked by Reliance Power IPO expected back in the market soon, Sensex could gain,” he added.

Provisional data from BSE shows that domestic institutions were net buyers of equities worth Rs1,291 crore on Wednesday. Since the beginning of the year, they have bought equities worth Rs11,469 crore.

Among Asian markets, Hong Kong’s Hang Seng index vaulted 10.72%, its biggest single-day gain in 10 years, to 24,090.17, adding 2,332.54 points. The Indonesian benchmark index was the second biggest gainer, up about 8%. The Chinese index gained 3.14%, while Singapore’s Straits Times index gained 4.08%. Japan’s Nikkei added 2.04%.

However, the Asian stocks rally did not extend to Europe, where early gains were pared after Jean-Claude Trichet, president of European Central Bank, remarked on the need to check inflation and ruled out an immediate cut in interest rates. The UK’s FTSE index fell 3.44%, while Germany’s DAX fell 4.81% at 9pm India time.

Earlier on Tuesday, the US benchmark index Dow Jones Industrial Average also staged a strong bounce back, recouping three-fourth of its losses to close at 11,971.19, with a modest loss of 128.11 points. On Wednesday, the Dow was trading at 11,852.02, at 9.20pm India time, down 111.72 points.

On Wednesday, turnover on BSE increased from Tuesday’s Rs6,861 crore to Rs7,099 crore. And on the National Stock Exchange, volumes in the futures and options segment declined from Tuesday’s Rs44,307.58 crore to Rs36,073 crore.

However, the rally on Indian stocks was not broadbased. While all 30 stocks in the Sensex gained, in the overall market, there were more losers, at 1,401, than gainers (1,302).

Still, analysts say investors are no longer panicking. “The correction was imminent. However, it was the pace and magnitude which bought sudden fear and panic among investors,” said Deepak Lalwani, a director at London-based brokerage Astaire and Partners.

HOT STOCKS for 23-01-08

STATISTICS :

Markets had a very bad sessions from last monday, so today can see a bit of recovery, one can say a bounce back can be expected after the fall, Nifty can trade at levels 4800 - 5200 levels, but remains volatile due to margin pressures, so do trade carefully in derivatives.

NOTE :

Almost all stocks are now available in cheapest prices so, buy now stocks with only good fundamentals only, so that no need to worry even if any further bad news from current levels could be expected.

DELIVERY :

POWERGRID : buy for a tgt of 180 :: 6 months

SAIL : buy for a tgt of 400+ :: 6 - 9 months

IFCI : buy for a tgt of 100+ :: 2 - 3 months

GMRINFRA : buy for a tgt of 300+ :: 9 - 12 months

RCOM : buy for a tgt of 1000+ :: 6 - 9 months

NOTE :

Trade with stop loss in this situation.

INTRADAY :

IFCI : buy for a tgt of 60+, sl@ 48

SATYAM : buy for a tgt of 390+ , sl @ 345

FUTURES :

ZEEL : buy for a tgt of 270+, sl @ 230 :: tgt is 310*+ before expiry

SAIL : buy for a tgt of 215+, sl@ 185 :: tgt is 238+

IFCI : buy for a tgt of 65+, sl @ 45

RNRL : buy for a tgt of 135+, sl @ 100

OPTIONS :

SATYAM : buy call 430 for a tgt of 8+ , now @ 1.5 rs

INFOSYS : buy call 1500 for a tgt of 45+, sl @ 17

NIFTY : buy 5600 call for a tgt of 80+, sl @ 25

Reliance Power: applicants rush to stop payment for IPO

Ahmedabad/ Mumbai: The mayhem in the stock markets for two consecutive trading sessions has taken its toll on the unofficial or grey market for stocks that has gone into “coma”, according to top brokers dealing in the market. Meanwhile, the grey market premium for shares of Reliance Power Ltd has sharply dipped from Rs500 to Rs100.

The fall has unnerved some investors who rushed to banks to “stop payment” of cheques they had issued to participate in the Reliance Power’s initial public offering (IPO).

Approximately five million investors had made an aggregate bid of Rs1,622 crore for the Reliance Power shares. Bankers to the issue and the collection banks are HDFC Bank Ltd, ICICI Bank Ltd, ABN Amro Bank NV, Axis Bank Ltd, Kotak Mahindra Bank Ltd and the Hong Kong and Shanghai Banking Corp. Ltd (HSBC).

After a cheque is submitted along with an application, the collection bank sends it to the clearing house, which, in turn, sends it to the drawee bank (or bank on which the cheque is drawn).

At any time during the process, the investor can tell the drawee bank to stop payment on the cheque. Once this is done, the drawee bank sends the application and the cheque to the collection bank, which, in turn, sends back the cheque along with the application to the investor whose application stands cancelled.

Sanjay Bothra, manager of Paldi branch of State Bank of Saurashtra in Gujarat, said he received several applications from his customers to stop payment, aggregating around Rs12 crore worth of shares in Reliance Power’s IPO.

“With such a steep fall in the stock market, we received requests from some of our clients to stop payment towards subscription of the Reliance Power IPO and we have done so,” he said. Officials at a State Bank of India branch in Gujarat have got more than 24 applications with similar “stop payment” instructions in the span of a couple of hours.

Things are no different in Mumbai. A branch manager at a large Mumbai-based brokerage, who did not wish to be identified, said that he has advised one of his high net-worth clients, who has applied for 200,000 shares and taken a funding of Rs50 crore for the same, to instruct his bank to “stop payment” for 100,000 shares. Executives at another Mumbai-based mid-sized brokerage said at least 30-35% of their clients, who had applied for the Reliance Power IPO, are now instructing their banks to stop payment.

Pradeep Bhavnani, a Mumbai-based sub-broker, who had mobilized 20,000 application for the Reliance Power IPO in the high net-worth individual and retail category, has instructed the banks to stop payment on close to 12,000 cheques on behalf of his clients in the last two days. According to him, Rs2,000 crore has been withdrawn through these cheques. “In the grey market, various quotations are coming and all of them are dicey. No retail investor is willing to take the risk.”

Bhavnani, who is also the president of National Association of Small Investors, wrote to the capital markets regulator on 21 January about the decision of some small investors to withdraw from the issue because of a meltdown in the financial markets.

Bankers based in Mumbai said a clearer picture will emerge in a couple of days as (Reliance Power) IPO applications were still pouring in for cheque clearance.

According to people familiar with the development in the grey market, the premium for Reliance Power shares was as high as Rs500 when the issue was open for subscription. “Yesterday some people wanted to sell at a premium of Rs225, but they failed to do so and today there is no buyer. Most of the grey market traders have switched off their mobiles,” a market operator said.

“Nobody is willing to give or take any sauda (bid) and many brokers in the grey market may back out of their commitment for Reliance Power IPO,” said another broker operating in the grey market, who too did not wish to be named.

The brokers do not expect any activity in the grey market for the next half-a-dozen IPOs that are set to enter the market next month.

Fed cuts interest rate by 0.75%

WASHINGTON: The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.

The surprise reduction in the federal funds rate from 4.25 down to 3.5 per cent marked the biggest one-day rate move by the central bank since it cuts its discount rate by a full percentage point in December 1991, a period when the country was struggling to get out of a recession.

Analysts said the Fed will likely delay cutting rates further at its January 29-30 meeting but will probably keep moving rates down aggressively as the economy continues to weaken.

"This move is not an instant fix," said Ian Shepherdson, chief US economist at High Frequency Economics. "The economy is still staring recession in the face, but at least the Fed now gets it."

In addition to cutting the funds rate, the Fed said it was reducing its discount rate, the interest it charges to make direct loans to banks, by a similar three-quarters of a percentage point, pushing this rate down to 4 per cent.

Commercial banks responded to the Fed's action on the funds rate by announcing similar cuts of three-quarter of a percent on its prime lending rate, the benchmark for millions of business and consumer loans. The action will mean the prime lending rate will drop from 7.25 per cent down to 6.50 per cent.

RBI may go forward with rate cut option

MUMBAI/NEW DELHI: Indian bankers are betting on a rate cut by the Reserve Bank of India (RBI) following the 75-basis-point Fed rate cut on Tuesday. A rate cut looks highly probable, given the huge difference between Indian and international rates.

The US Federal Reserve announced the first interest rate cut, both Fed Funds rate and discount rate, this year after the bond and foreign exchange markets in India had shut for the day. Bank of Canada was quick to follow, reducing interest rates by 25 basis points to 4%, following the emergency measures in the US.

Bank of Japan released statements affirming its stance of not lowering interest rates, despite acknowledging that the recent weakness in financial markets did pose a risk to the nation’s economy. Back home, treasury managers at local bond houses and multinational banks now feel that the rate action in the US could force RBI to follow suit.

A finance ministry source said, “The overall impact should be positive for the markets. However, it would increase the interest rate differential and make external commercial borrowings (ECBs) more attractive. This could prompt RBI to go for a cut in domestic interest rates.”

Few market insiders expect RBI to step out of schedule and announce a rate cut before the monetary policy review on January 29. “Judging by what happens in the market on Wednesday, RBI may take a call on whether to advance its response without waiting till January 29,” a source said.

Treasury officials expect a softening in interest rates. RBI does not have much headroom to maintain status quo and remain insulated.

“It will have to cut the repo rate by 25 basis points. In addition to this, we do not rule out a cut in the cash reserve ratio (CRR) since the government has said liquidity has to be maintained due to the choppy markets. Also, since the busy season is on, there is a case to support liquidity. A 75-basis-point cut is substantial and can snowball into a global contagion,” an official added.

For starters, the lowering of rates in the US would make borrowing in overseas markets a lot cheaper for local corporates. These companies would also stand to benefit from a further rise in rupee levels against the dollar.

The six-month London inter-bank offered rate (Libor) is currently quoting at 3.68%, but following the rate cut in the US, it is expected to come down sharply. This could significantly lower the cost of funds for those companies.

As such, there has not been much activity in the loan syndication market since the beginning of the New Year. This could be mainly attributed to RBI tightening overseas borrowings norms for Indian corporates.

Yes Bank president, financial markets and institutions Ajay Mahajan said, “There has not been a whole lot of corporates borrowing offshore, but with the Libor coming down, there will be interest savings for companies which have borrowings in foreign currencies.”

On the impact of the Indian forex and bond markets, Mr Mahajan pointed out, “The impact of the Fed rate cut will not be direct, but the overall attractiveness of the rupee over the dollar will possibly increase with the differential being created. Bonds will react positively to the rate cut, with the differential in the US and Indian markets widening. It also raises the expectation of a repo rate cut by RBI sooner than later.”

Investors lose trillions; FM says don't panic

Finance Minister P Chidambaram sought to calm investors panicked by a meltdown of over 2,000 points on Tuesday morning leading to suspension of trading, saying that enough liquidity would be provided to market players.

Investors lost over Rs 6 lakh crore (Rs 6 trillion) within minutes of the opening of the Bombay Stock Exchange on Tuesday.

"I am assured by the Reserve Bank of India [Get Quote] and all the banks that enough liquidity will be provided to brokers and market players. Liquidity will not be an issue," Chidambaram said.

Ahead to his visit to Davos for participating in the World Economic Forum, Chidambaram exuded confidence that investors would return to market as fundamentals of the economy were strong.

"Worries of western world should not be allowed to overwhelm us... our economy is very different from some economies of developed countries. Our economy is a strong economy and corporate sector is very strong," he said after the exchange authorities suspended trading within minutes after the bourses witnessed a sharp plunge.

Even after the market opened at 1100 hours, the sentiments were heavily toward sell and within an hour the BSE Sensex was reading down by over 2200 points.

To a query, Chidambaram said there is no ground for sentiments to be negative in the long run as fundamentals of Indian economy are strong.

"We will grow at nine per cent this year. Even Rangarajan Committee (Prime Minister's Economic Advisory Council) has said we will grow at 8.5 per cent next year," the finance minister said.

Banks have reported that investments in the economy are running very high as the demand for credit is strong, he said.

"RBI has stated that investment in pipeline is also strong. Fundamentals (of the economy) are very sound. Corporate profits are high and corporate income tax is at an all-time high," he said.

When asked whether institutions would be advised to buy stocks at this moment, Chidambaram said: "We are not advising institutions to do this or that. Institutions are good judge of what are valuations today."

However, he said analysts and advisers have advised investors to stay calm. "I am sure investors will take informed and matured decisions and not give any room to unwarranted apprehensions and market rumours," he added.

In the morning, stock market suspended trading for an hour after the benchmark Sensex hit the lower circuit limit.

Investors lose Rs 6 trillion within minutes of opening

Investors on Tuesday lost over Rs 6 lakh crore (Rs 6 trillion) within minutes of opening of the Bombay Stock Exchange, which was immediately suspended for an hour after the 30-share barometer index, Sensex, hit the circuit limit of 10 per cent.

This loss of Rs 6,54,887.85 crore (Rs 6.548 trillion) comes on top of over Rs 11 trillion loss suffered by investors on the Dalal Street [Get Quote] [Get Quote] in the last six days.

"Small investors should stay away from the markets as of now. Let the market normalise and the volatility reduce," domestic brokerage firm SMC Global Vice President Rajesh Jain told PTI.

"Better to out when in doubt" he said, adding that there is too much of panic in the markets and it is better to stay away from it.

The Sensex lost 5,251.15 points in last seven trading sessions including today's early morning trade till suspension, while investors' wealth -- measured in terms of cumulative market capitalisation of all the listed companies -- has declined by a whopping Rs 18,40,173.31 crore (Rs 18.401 trillion).

As per information available on the Bombay Stock Exchange Web site, the total market capitalisation stood at Rs 59,53,525.87 crore (Rs 59.535 trillion) at the end of on Monday's trading against Rs 71,38,810 crore (Rs 71.388 trillion) before bourses began business last week on January 14.

The 30-share barometer tumbled 2,029.05 points to 15,576.30 within minutes of start of trading. The barometer index on Monday lost 1,408 to 17,605.35 points on concerns regarding the US economy going into recession.

The 10 biggest falls in Sensex history

It was a Terrible Tuesday for the bourses. The Sensex saw its biggest intra-day fall when it hit a low of 15,332, down 2,273 points. However, it recovered losses to some extent and closed at a loss of 875 points at 16,730.

Trading was suspended for one hour at the Bombay Stock Exchange after the benchmark Sensex crashed to a low of 15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent.

At the time of suspension, the Sensex was quoted at 15,576.30 points, plunging 2029 points (11.53 per cent) from Monday's close.

Investors on Tuesday lost over Rs 6 lakh crore (Rs 6 trillion) within minutes of opening of the Bombay Stock Exchange, which was immediately suspended for an hour after the 30-share barometer index, Sensex, hit the circuit limit of 10 per cent.

This loss of Rs 6,54,887.85 crore (Rs 6.548 trillion) comes on top of over Rs 11 trillion loss suffered by investors on the Dalal Street [Get Quote] in the last six days.

The Sensex and Nifty saw its second biggest intra-day loss on Monday. Relentless selling saw the index crash to a low of 16,951 - down 2,063 points (10.8%) from the previous close.

The index shed 1408.35 points (7.1%) to close at 17,605.40, the biggest-ever loss in absolute terms and also the first-ever four digit loss for the index at close. The Nifty lost 496.50 points (8.70%) to close at 5,208.80 points.

The Sensex saw its third biggest intra-day loss on October 17, 2007, when it plunged by 1,743 points. The Sensex hit a low of 17,307.90 points within minutes of opening, following which trading was suspended in the market for an hour.

The markets had crashed on the wake of Securities and Exchange Board of India's (Sebi) proposal to tighten the rules for purchase of shares and bonds in Indian companies through the participatory note (PN) route.

Here are the 10 biggest falls in the Indian stock market history:

Jan 21, 2008: The Sensex saw its highest ever loss of 1,408 points at the end of the session on Monday. The Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of the US recession.

Jan 22, 2008: The Sensex saw its biggest intra-day fall on Tuesday when it hit a low of 15,332, down 2,273 points. However, it recovered losses and closed at a loss of 875 points at 16,730. The Nifty closed at 4,899 at a loss of 310 points. Trading was suspended for one hour at the Bombay Stock Exchange after the benchmark Sensex crashed to a low of 15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent.

May 18, 2006: The Sensex registered a fall of 826 points (6.76 per cent) to close at 11,391, following heavy selling by FIIs, retail investors and a weakness in global markets. The Nifty crashed by 496.50 points (8.70%) points to close at 5,208.80 points.

December 17, 2007: A heavy bout of selling in the late noon deals saw the index plunge to a low of 19,177 - down 856 points from the day's open. The Sensex finally ended with a huge loss of 769 points (3.8%) at 19,261. The NSE Nifty ended at 5,777, down 271 points.

October 18, 2007: Profit-taking in noon trades saw the index pare gains and slip into negative zone. The intensity of selling increased towards the closing bell, and the index tumbled all the way to a low of 17,771 - down 1,428 points from the day's high. The Sensex finally ended with a hefty loss of 717 points (3.8%) at 17,998. The Nifty lost 208 points to close at 5,351.

January 18, 2008: Unabated selling in the last one hour of trade saw the index tumble to a low of 18,930 - down 786 points from the day's high. The Sensex finally ended with a hefty loss of 687 points (3.5%) at 19,014. The index thus shed 8.7% (1,813 points) during the week. The NSE Nifty plunged 3.5% (208 points) to 5,705.

November 21, 2007: Mirroring weakness in other Asian markets, the Sensex saw relentless selling. The index tumbled to a low of 18,515 - down 766 points from the previous close. The Sensex finally ended with a loss of 678 points at 18,603. The Nifty lost 220 points to close at 5,561.

August 16, 2007: The Sensex, after languishing over 500 points lower for most of the trading sesion, slipped again towards the close to a low of 14,345. The index finally ended with a hefty loss of 643 points at 14,358.

April 02, 2007: The Sensex opened with a huge negative gap of 260 points at 12,812 following the Reserve Bank of India [Get Quote] decision to hike the cash reserve ratio and repo rate. Unabated selling, mainly in auto and banking stocks, saw the index drift to lower levels as the day progressed. The index tumbled to a low of 12,426 before finally settling with a hefty loss of 617 points (4.7%) at 12,455.

August 01, 2007: The Sensex opened with a negative gap of 207 points at 15,344 amid weak trends in the global market and slipped deeper into the red. Unabated selling across-the-board saw the index tumble to a low of 14,911. The Sensex finally ended with a hefty loss of 615 points at 14,936. The NSE Nifty ended at 4,346, down 183 points. This is the third biggest loss in absolute terms for the index.

Market crash: BJP blames Sebi, FM

Former MP and a member of the BJP's National Executive Kirit Somaya on Monday alleged that overvaluation of initial public offers (IPOs), over-speculation and faulty settlement mechanism were behind Monday's stock market crash.

"The issue of the market crash will be taken up at the BJP's national executive, which is meeting on Sunday, and a strategy will be devised on how to take Finance Minister P Chidambaram to task on this issue," he said.

Somaya said around 20 million retail investors and 40 million investors in mutual funds and unit-linked pension schemes lost large amounts of money. He accused the finance minister and Sebi of making "extra efforts" to ensure the stock market rises after every major fall.

He said had Sebi and the finance ministry allowed the markets to find their natural level after the sub-prime crisis in the US, the markets would not have seen such a bloodbath on a single day.

"Another concern is financing of margin money of big players by banks and non-banking financial institutions which is completely non-transparent," he said.

Somaya said after Sebi allowed change in IPOs' valuation norms from the one based on profits of the past three years to profit projections for the next 10 years, the Parliament's standing committee suggested some safeguards for the retail investors.

However, Sebi allowed a change to the new system without these safeguards, he added.

Sebi also allowed introduction of futures and options without ensuring online clearing of cheques by banks, which Somaya said created a faulty settlement system.

"Thousands of investors who wanted to exit the market after Friday's crash couldn't as their cheques could not be cleared," he said. "Thus, they either lost their margin money or margin shares," he said.

India Inc's top ten promoters lose over $68 bn

If you have been left poorer after the latest market crash, you are not alone to get that sinking feeling. Keeping company are some of India’s richest and most powerful businessmen.

In the last seven trading sessions, India’s top ten promoters, including Mukesh Ambani, Tatas, Anil Ambani, KP Singh (of DLF), Anil Agarwal (Sterlite Group) and Chandras’ (Unitech), have together lost over $68 billion in the market crash. In percentage terms, the decline in their net worth is close to 25%.

Biggest loser: Topping the list of losers is Anil Ambani, whose net worth is down by nearly $15 bn.
Lost in diversification: Loss in Tatas’ market cap shows that in a secular crash even diversification doesn’t work.
Hit hard: The market also punctured rising stars such as Anil Agarwal, OP Jindal family, Mittals of Bharti Airtel.
Topping the list of losers is Anil Ambani, whose net worth is down by about $15 billion, or nearly a third from its peak of $47 billion reached on January 11.

Next in line is Mukesh Ambani, whose wealth has decreased by $14.2 billion. The KP Singh family comes third, thanks to the decline in DLF’s stock price, with a loss of $12 billion.

In percentage terms, the biggest losers are, however, Chandras’ of Unitech. Their net worth declined by over $5 billion, or 32%, compared with January 11.

The market crash didn’t spare the Tatas either, despite that fact that their group companies were in the forefront of the rally that took place in the past three months. The market value of the promoter’s holding declined by 21%, or nearly $8 billion, in the recent crash.

Loss in Tatas’ market cap shows that, in a secular crash as we have seen, even diversification doesn’t work. Tatas have over two dozen listed companies with presence across sectors as diverse as IT, steel, automobiles, power, hotels and consumer goods among others. In contrast, other groups have limited sectoral diversification.

The market also punctured rising stars such as Anil Agarwal (loss of $4.5 billion), OP Jindal family ($3.2 billion), Mittals of Bharti Airtel ($2.5 billion), Tulsi Tanti of Suzlon (down $2 billion), Gaurs of Jaypee Group ($1.8 billion). As you would have guessed by now, the faster you rise, harder you fall.

To arrive at a promoter’s net worth, we have netted out the cross-holding of listed group companies in each other. For instance, Mukesh Ambani’s net worth only includes the market value of his investment companies stake in RIL. It excludes the promoter’s stake in RPL, as it has been promoted by RIL.