AHMEDABAD: Indian police fear suicides by brokers and investors after a steep market slide wiped billions of dollars off share values, officials said yesterday.
Policemen in the western city of Ahmedabad were keeping watch near lakes and canals to dissuade people in distress from trying to kill themselves and rescue teams were on alert.
“A financial crisis can trigger suicides. We are just trying to prevent them. Till now, no such cases have been reported,” said R K Patel, a police official in Ahmedabad.
The Bombay Stock Exchange had a market value of $657bn last week after falling 10% on Thursday and Friday. That dropped to $624bn yesterday as the main index plunged another 10% before pulling back to end 4% down.
The meltdown left brokers and retail investors badly shaken and put policemen in at least two trading cities on alert against suicide by those facing severe losses.
Ahmedabad, capital of the western state of Gujarat, is considered particularly vulnerable to stock market volatility. It is one of India’s main trading hubs with some 5mn retail investors.
“I borrowed money to trade in the market. I lost it all in the past two days,” said 37-year-old Sanjay Joshi, a small investor. “I don’t know how will I repay my loans.”
Groups of brokers and investors burned a straw effigy of Finance Minister P Chidambaram at Ahmedabad’s stock exchange, holding him responsible for the market slide after months of a spectacular bull run.
In the 1990s, a stock market meltdown led to several bankrupt brokers and small investors committing suicide across India. Some of the deaths happened in the eastern commercial hub of Kolkata, formerly known as Calcutta, and police deputy commissioner Gyanwant Singh said they did not want a repeat.
“We are watching people at the stock exchange. We are on an alert against possible suicides,” he said.
For some, whole fortunes were lost in just two hours of trade. “Gold has turned into brass. We are finished,” said S S Gupta, a middle-aged Mumbai broker.
Analysts described the slide - as much as 22% from an all-time high of 12,671.11 points on May 11 - as a correction and said order should return soon.
“It seems overdone and the market should stabilise during the second half of this week,” said Rajat Jain, chief investment officer, Principal Asset Management Company.
Small investors have jumped on to the bandwagon in the past 12 months to benefit from a soaring stock market in one of Asia’s fastest growing economies.
But yesterday’s fall shook their faith in the economic outlook.
“I am feeling cheated,” said Rakesh Shah, a 31-year-old retail investor who lost up to Rs500,000 ($11,000).
“My investments were based on statements of the wellness of Indian economy. With such a huge crash what is the future of the economy, where has the faith in Indian markets gone?
Opposition politicians blamed “manipulators” and demanded that Chidambaram resign. “The stock market is in the hands of manipulators. We had never seen such a fall,” said Yashwant Sinha, former finance minister and a main opposition Bharatiya Janata Party lawmaker.
Chidambaram, however, tried to reassure investors. “The growth story I am confident will continue this year too,” he said.
Dealers said that statements by the central bank, the finance ministry and market regulator that any payment problems linked to the plunge would be handled by asking commercial banks, helped restore confidence later in the day.
The benchmark 30-share BSE closed down 456.84 points at 10,481.77 after it fell an intraday record 1,111.71 points to 9,826.9 before trading was halted for an hour in early market action.
The rival National exchange’s 50-share index, known as the Nifty, fell 289.6 points or 10% to 2,896.45 before the halt was called and closed down 165.55 or 5.10% at 3,081.35.
Losers led gainers 2,109 to 236 on volumes of Rs39.84bn ($872mn).
“Domestic funds bought large and mid-cap stocks at lower levels on re-opening early afternoon,” said an analyst with an equity research firm on condition of anonymity.
Yesterday’s trade followed a fall led by retail investors that saw the Sensex lose 12.3% in the previous six trading sessions, which prompted some funds to think it was a good time to buy.
“Some of the funds were seen bottom fishing after the market re-opened. We still are concerned about the liquidity position relating to futures contracts over the next two days,” said Naresh Garg, chief investment officer at Sahara Mutual Fund referring to the end of the May futures contract.
The sharp fall however raised some concern that investors who borrowed to buy shares, or bought stocks via futures contracts, in the past few months may have trouble making payments.
As the market falls, the pressure on investors to make good their position increases and can become a vicious circle as investors try to limit their losses.
However, the market regulator, the Securities and Exchange Board of India, sought to assure investors not to panic.
“There are no reasons to worry. There is no liquidity problem,” securities chief M Damodaran said.
Chidambaram also intervened, telling reporters there was “no problem with liquidity. I have spoken to the Reserve Bank of India (RBI) today.”
He added that economic “fundamentals are strong” and “my advice for retail investors is to stay invested. Mutual funds are buying. (Foreign funds) have invested for the long-term. There is no reason for any panic.”
The RBI, the country’s central bank, said it would ensure that commercial banks had enough funds to meet any large payment demands via banks or brokerages.
The rupee weakened against the dollar yesterday to 45.6 from 45.4 last week and strengthened marginally against the euro to 58.1, compared to 58.3. – AFP, Reuters
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