Markets fall again, but investors miss bus

MUMBAI: In a day of dramatic developments, when the Bombay Stock Exchange Sensex shed 875 points, the US Federal Reserve cut overnight interest rates by a dramatic 0.75% — its first emergency move since 2001 — to 3.5% from 4.25% due to fears of an impending recession.

With Indian investors losing close to Rs 10 lakh crore in two days, the government assured enough liquidity to the markets, enabling the Sensex to reduce its losses from 2,273 points earlier in the day to 875 points by the end of the session. The Sensex closed the day at 16,729.94, a net fall of 4.97%.

“I am assured by the Reserve Bank and all the banks that enough liquidity will be provided to brokers and market players. Liquidity will not be an issue,” finance minister P Chidambaram said.

But the big outcry among investors was not about the market fall, but the fact that they couldn’t buy when the prices were so lucrative. Take the case of Neville Kavarana, 30. Seeing the markets plunge, he called up his brokers Sharekhan and Integrated India to pick up shares of Reliance Petroleum Ltd and Reliance Natural Resources Ltd. “They told me that the systems were down and that higher authorities had ordered them not to execute trades on behalf of individual investors,” says Kavarana.

Kavarana was just one among hundreds of retail investors who were unable to take advantage of the Sensex’s intra-day fall which saw it go down all the way to 15,332.42 points at one point.

From its all-time closing high of 20,873 points on January 8, 2008, that was a drop of 5,540 points, or 26.5%.

“If we are advised to buy at lower levels, and the brokerage itself does not execute the orders, what’s the point?” he laments.

An official from Sharekhan, who did not wish to be named, said: “There was no such problem. If the order came at a time when the exchange had suspended trading for an hour, then it could not have been executed. The other reason could be that the price at which the order must have been placed would not have matched the market price.”

But Kavarana says that he wanted to order Reliance Natural Resources at Rs 81, and it had gone down to Rs 75 intra-day. But he was still not allowed to buy despite having Rs 20,000 in his account.

Another investor who got stuck on Tuesday was Pratibha Singh Chauhan from Indore. She first placed an order for 50 shares of RNRL at the market rate, but her order got rejected. Subsequently, she tried for 40 shares and 10 shares, but still wasn’t able to get it. “Finally, I thought I’ll place an order for 1 share, and that too didn’t get executed,” she says.

Reacting to this plight of retail investors, Anil Kaul, chief executive officer of ICICIDirect.com, the largest online broking outfit in the country, said: “It was a tough day in office, but we furnished the margin requirements to exchanges and provided clients with uninterrupted access to the market to execute their trades.”

Clients of larger brokers may not have been as badly affected as those of the smaller ones. “Smaller brokers would have found it difficult to pay the exchanges,” said a broker who did not want to be named.

When a client places an order, he is usually expected to furnish 15-20% of the amount upfront, and the rest on settlement day, which is two days from the day the order is placed. Today, with volatility being very high, the amount to be furnished upfront went to about 35-40%, as a result of which many small brokerages could not furnish this amount to the exchanges. This meant their trading terminals had to be shut down.

Neither NSE nor BSE were in a position to give out the number of terminals that had been shut by them.