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Margin calls trigger fresh selling spree
January 28, 2003 16:11 IST
The market witnessed all-round selling pressure in stocks for the third straight session on Tuesday.
The slide was seen in Old as well as New Economy stocks. The latter slipped from the day's high, after an early surge.
The losers among Sensex stocks were Telco (down 2.9% to Rs 149.50), HPCL (down 2.9% to Rs 291.50), Hindustan Lever (down 2.8% to Rs 173.45), ACC (down 2.2% to Rs 142.70), Reliance Industries (down 1.2% to Rs 270.35) and SBI (down 1.2% to Rs 282.90),
Infosys Technologies (down 0.4% to Rs 4,276) declined from the day's high of Rs 4,349.50. Satyam Computer was up 0.23% to Rs 219.20, slipping from the day's high of Rs 224.10. Zee Telefilms was down by 1% to Rs 82, declining from the day's high of Rs 84.40.
Among second-rung IT stocks, Hinduja TMT (down 5.9% to Rs 171.60), Aftek Infosys (down 3% to Rs 154.60) and VisualSoft Technologies (down 2% to Rs 193) were in the red, declining sharply from their higher levels.
Dealers said that brokers indulged in a selling spree, stemming mainly from margin calls. Brokers, who fund positions in the market of high net worth individuals and other investors including retail investors, pressed sales as the stocks had fallen sharply in the last few sessions. Thus, if an investor bought a stock through funding from a broker at Rs 100 and if the scrip falls by 10% to Rs 90, then the investor has to pay additional margin money to the broker or else the broker sells the stock. Most of the brokers fund such purchases at a interest rate of 15-16% per annum, according to dealers.
Kotak Securities is one among the prominent brokers who indulge in the funding business for high net worth individuals and retail investors, as per market sources.
Meanwhile, dealers said that since the current slide is primarily due margin calls, the market may stage a smart recovery in case there is any positive development.
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Source: www.capitalmarket.com
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