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Sensex Hits Upper Circuit

Record gains forced stock markets to shut down

Expectedly, after the resounding victory by the Congress Party in the general elections, markets skyrocketed as soon as the opening bell was sounded, eyeing a windfall in terms of government spending in a host of sectors to pump-prime the economy.

The sentiment was so strong in the trading community and the going was so good on the BSE Sensex that it reached the 17.24 per cent gain mark in no time, forcing the authorities to temporarily halt trading, when the circuit breaker* kicked in.

The same story repeated itself on the National Stock Exchange where the the trading was also halted with the Nifty up by 17.33 per cent.

In terms of points Sensex has risen by as much as 2,099 points to 14,273 points. Nifty powered to a 636.40-point gain to 4,308.05 points. While Sensex breached the 13,000- and 14,000-pt mark, Nifty crashed through the 4,000-pt mark.

The spectacular nature of the rally was such that barring two, ITC and Hindustan Unilever, all the other constituents of the Sensex, that means 28 other scrips, hit the upper circuit. Among the top performers ware BHEL with a 32.72 per cent gain, L&T with a mammoth 29.53 per cent gain, DLF Ltd with a 25.82 per cent gain, ICICI Bank with a 25.30 per cent gain and HDFC with a 23.46 per cent gain.

Even the scrips that did not hit the circuit breaker, were gaining in a major manner, with ITC up by 7.4 per cent, Hindustan Unilever up by 6.3 per cent.

However, it was not anything being done either by the Sensex or the Nifty, that we are generally aware of, that drove the authorities to shut the exchanges down, it was the fastrack approach of the little known CNX S&P Dexty (S&P CNX Defty is S&P CNX Nifty, measured in dollars) on the NSE that caused it. The index zoomed to a 20.87 per cent gain, triggering the circuit breaker. According to rules if either Sensex or Nifty breach the 20 per cent mark, the exchanges will be closed for trading.

Signalling the prospects for goood times was A. Balasubramaniam, CIO of Birla Sun Life Mutual Fund (BSLMF), who said, “With chances of proactive monetary and fiscal policies combined with a stable government improving, one can only expect that the economy will be back on track much faster than what one could have thought of. Though the Indian equity market is going to cherish the positivity, bond market may not cherish as much as the equity market due to fiscal concerns”.

The markets have been closed for the day.

 

Widest Gap Sensex Opening
    Year      % change from last close
18-May-09   17.24*
04-Apr-95   7.20
26-Mar-96   5.84
25-Sep-95   5.78
06-Mar-00   5.28
28-Oct-08   5.26
10-Apr-00   5.03
16-Oct-00   4.54
26-Oct-98   4.46
*From Friday's Close of 12,180.86 pts
 

 

*As per a SEBI rule, an index-based market wide circuit-breaker system has been implemented since July 2, 2001, that requires halting of trade, applied at three stages of 10 per cent, 15 per cent and 20 per cent.

This rule effectively halts all trading in all equity and equity derivative markets In India. It applies equally on the BSE Sensex and NSE CNX Nifty.

At the 10 per cent gain mark, markets are closed temporarily for an hour, if the upper  circuit is hit before 1 p.m. However, if it happens after 2:30 p.m, there will be no halt and markets will keep on trading.

In case of 15 per cent movement, there will be a 2-hour stoppage if it happens before 1 p.m., but if the same happens after 2 p.m., trading will be halted for the day.

In case of a 20 per cent movement by the indices, no matter what the time of the day it is, trading is halted permanently for the entire day.