Black monday of indian market
...went into the exit mode and pulled out $135 million on MAY 12th 2004.The sensex went down 230 points. As the poll results came out,fears of Left Parties threats led to the sensex fall by 330 points on May 14th,leaving BSE with Rs.1 lakh crore loss.FIIs continued to sell largely with Rs.2100 crores pulled out. Reason for FIIs pullout initially: a)High capital appreciation in India. b)Low US interest rate. • Till the trading day prior to the “Black Monday” the FIIs pulled out Rs.600 crore stocks. “Hedge fund” investments which had played a large role last year had taken a large position on PSUs in anticipation of privatization by the Government.The fear of loss of investments in future due to leftist effect on the govt. created panic in the market.Large selling over a short period caused the market to fall. OTHER LIKELY REASONS OF FALL: • News of heavy players like FIIs spread quickly in the market and triggered a major panic selling by everyone else too. • The most likely theory of fall is that on the last trading day, the sensex fell by 330 points.This caused erosion in the value of collaterals and other forms of safety margins the brokers maintain with the stock markets as surety.To prevent payment defaults,the exchange asked them to enhance their securities. Brokers who could not liquidate the equities the exchange maintains as collaterals,are sold off automatically.This might have caused a fall on Monday. • High net worth investors and small retail investors cannot cause such a violent change in market.Other guesses for the fall is that the large corporate houses and brokers themselves sold early cauing the sensex to fall rapidly. DAMAGE CONTROL: • The effect of all these caused the stock exchange to ...