Mirroring the weak trend in global markets on the one hand and Reliance Power IPO’s overwhelming response on the other, the Bombay Stock Exchange’s flagship index on Wednesday dropped 382.98 points to close at 19,868.11, a decline of 1.89 per cent. This was the second day of fall and Sensex has lost over 860 points in two days.

The Sensex opened with a negative gap of 171 points at 20,080 and thereafter unabated selling saw the index drift deeper into red as the day progressed. It tumbled to a low of 19,513 - down 738 points from the previous close.

Aggressive buying at lower levels saw the index stage a significant recovery, and finally settle with a loss of 383 points at 19,868. The market breadth was extremely negative - out of 2,840 stocks traded, 2,208 declined, 614 advanced and 18 were unchanged on Wednesday. The broader CNX S&P Nifty at National Stock Exchange fell 138.5 points or 2.28 per cent to 5,935.75 points.

Selling pressure

It is a common knowledge that any big IPO in its wake puts a selling pressure on bourses, with investors wanting to generate more liquidity to participate in such IPOs. But the Reliance Power IPO, with its sheer size of over Rs 11,500 crore, is almost in a different stratosphere with as much as 4.20 crore forms distributed as of Tuesday and received oversubscription of nine times on the very first day. “People are selling off their shares to invest in Reliance Power IPO, so the market has dropped,” says a broker in Mumbai, adding: “The Sensex may go up after the issue closes on January 18.”

A relationship manager from Kotak Securities said, “Public have already raised part of the capital by raising selling shares, hence the drops in Sensex. They are also taking loans.”