SUPERSONIC SENSEX (INDIA STOCK MARKET) CREATES HISTORY WITH LARGEST INTRADAY JUMP !

Monday was an action packed day for the Indian stock market. All the investors were exepecting a big rally due to the victory of the congress led UPA in the recent elections. I was guessing a run of around 1,000 points on the sensex a day earlier on sunday.

In the morning as i left for office at 11:30 AM, i switched on my radio in the car and was shocked to hear the news of circuit being applied in the stock market due to sudden upsurge.

Nearly all market participants had expected the key indices to rise 8-10% in early trade following the UPA’s convincing win in the recent elections. But only few had expected the gains to sustain till the end of the day.

IT WAS a frenzy unprecedented in the history of the Indian stock market. Investors scrambled to buy stocks as if there was no tomorrow, almost certain that the emergence of a stable government at the Centre would solve all the ills dogging the economy. In the mad rush, circuit breakers on the upside were triggered, and trading had to be halted from 12 noon onwards. This is the first time that trading has been suspended after the upper circuit breakers were breached.

The 30-share Sensex ended the truncated session at 14,284.21, up 2,110.79 points, or 17.3%, over the previous close. The 50-share Nifty ended the session at 4,323.15, up 651.50 points, or 17.74%, over the previous close.

Monday’s spectacular rally has benefited only those who are already invested. Traded turnover on both exchanges combined was barely Rs 3,000 crore, indicating that few traders or investors got a chance to participate in the upswing. Foreign institutional investors managed to make net investment of just Rs 45 crore.

Indications are that the market could rise further on Tuesday, but there will be profit-booking at higher levels, as brokers are advising their clients to take profits while they can.

The rupee moved in sync with stocks, and posted its biggest single-day gain against the dollar in more than 11 years when it closed 3% higher at 47.88 on Monday. Gold, however, lost its sheen by Rs 385 and closed at Rs 14,440 per 10 gram in Mumbai.

There was some confusion early on, as the indices breached the first 10% circuit breaker without trading being halted. The Nifty had risen more than 14% and the Sensex close to 12% when trading was stopped a few minutes after 10. When trading resumed at 11:55 am, indices quickly shot past the next trigger levels (in terms of points) prompting exchanges to halt trading for the rest of the session.

DECODING CIRCUIT BREAKER

> What is a circuit breaker?

A circuit breaker helps check abnormal movement in indices, and also stock manipulation. The breaker is applied in three stages of movement — 10%, 15% and 20% — either up or down.
How’s the circuit limit fixed?
A circuit limit is fixed on the basis of the indices’ closing values at the end of the previous quarter. Monday’s limits were based on the closing values of the Sensex and the Nifty on March 31, 2009.
> A MINUTE IN HISTORY

• For the first time in Indian stock market history, trading suspended for hitting the UPPER CIRCUIT
• Only 845 companies were able to trade on BSE while the number on NSE was just 587