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Fear over the markets

Panic continued to rule the market for the second day in succession as marketmen and brokers continued to sell in large quantities of scrips in anticipation of severe sanctions being imposed by the United States of America.

Barely had the dust settled down on the triple explosions on Monday at Pokhran when the markets were once again rocked by the second round of explosions at India's nuclear testing site.

Earlier, when the US threatened severe sanctions against the country for violating the Comprehensive Test Ban Treaty, marketmen had remained hopeful that the storm would pass quickly and that the international community would impose only minor sanctions on the country.

But hopes were dashed to the ground after it became apparent that the international community would not relent on imposing the severest of sanctions against the country.

With fear prevailing over the Bombay Stock Exchange, equity prices on the 30-share Sensitive index swooped down today on heavy selling pressure from foreign institutional investors and local investors. The market began the day on an extremely low note and kept on falling as rumours kept circulating through the market that many foreign company's were on the verge of rethinking their investment plans in the country and were all set to pack and go home.

The market opened with the Sensex at 3897.88 points, a full 47 points lower than yesterday's close. With no definite statement coming from the prime minister's office about the future course of action, uncertainty continued to haunt brokers who were left clueless about the future course of action.

"This situation is totally unique to us. We do not know what will happen and how the country will suffer," says Manish Shah, assistant manager of Gold Crest Securities.

The Sensex dipped sharply with the 30-share index falling to a low 3776.33 points before closing the day at 3782.76 points. A fall of an awesome 162 points. Points Admits Niren Shah, vice-manager of Safe Securities Ltd, "This is the greatest fall since the H D Deve Gowda government fell on March 31, 1997. Then the market fell by 302 points and there is fear that unless a definite statement is made by the government, short selling will continue."

The fear was echoed at the National Stock Exchange with the 50-share Nifty continuing to slide down the index, losing another 38 points today.

The nervousness was also felt in the international markets with the Skindia GDR index falling by 4.88 per cent to close at 901.89 points. Admits Maneesh Gupta, vice president, Skindia, "The main worry is the impact on the Indian companies especially at a time when the economy was just beginning to look up."

While companies whose earnings depend on exports and whose dependence on imports of foreign capital may be affected, analysts are anticipating another year of depression following the imposition of sanctions. "Software companies will certainly be hit and companies with good potential growth will find their profits severely eroded," says U R Bhatt, fund manager Jardine Fleming.

Despite the black clouds hanging over, a silver streak of optimism remains in the form of the Comprehensive Test Ban Treaty. With many anticipating India signing the CTBT, there is a likelihood that the US will not impose any sanctions against the country. But till such time as the comes true, the markets are bound to react to the Pokhran test range and at the international ire.