The fall in Sensex after the 240-point spurt in the previous session unnerved marketmen. Sensex moved up to 3434.46 before closing at 3292.33. On the National Stock Exchange, the NSE-50 index dropped 20.35 points on massive unloading by foreign funds and bear operators. The volume of business declined modestly in the absence of bull support. Most of the bear operators had covered their outstanding positions as per the SEBI's instruction.

The market was agog with rumours that some brokers had obtained a stay from a court on the SEBI order restricting short sales. On Tuesday, SEBI had in consultation with exchanges, temporarily prohibited short sales to stem the market slide. Such rumourstriggered selling by those who had taken long positions on Wednesday.

But BSE denied the rumours in a notice sent to members through the on-line trading system.

The appreciation in the Indian rupee against the dollar failed to attract the FIIs and other investors. The recovery in the Japanese yen and other Asian stock markets also failed to buck up the sagging sentiment. FIIs continued with heavy selling and sold sizeable number of blue chips like Reliance, ACC, Tisco, ITC, Hindustan Lever and software counters. Domestic institutions, UTI and LIC, who were the major players restricted their buying and made purchases in some index-based scrips.

Besides, there was speculation that four to five brokers were likely to be declared defaulters for their failure to meet payment commitments. "SEBI's move to help the bulls out of the crucial phase could create a trap for the bears," said an analyst with a leading FII brokerage firm, adding, "the regulator must remember that the market cannot survive when oneparticular segment is deprived of the hedging facility. Such a move could make the market hollow and would be more driven by rumours rather than market forces."

When the market opened on a positive note at 3,400.95 levels and further touched an intra-day's high of 3,434.46, some UK based FIIs were rumoured to have pressed huge sales which saw the index moving in the southward direction in the absence of substantial support by the domestic institutions. FIIs were rumoured to have dumped huge chunks of MTNL, HLL, SBI and Telco which saw these stocks fall by over 5 per cent.

Although BSE top brass kept assuring the brokers about the exchange's financial health, the market was agog with rumours that the pay-in conducted on June 18 would fail as five brokers were still facing financial problems. "We've almost sorted out the problem. The market is functioning smoothly," a BSE director said.

Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.