Monday's crash was caused by a combination of things. We got bad cues from global markets this morning and that might have been the immediate trigger. We underperformed most global markets on Monday.
The ferocity with which we closed, at the lowest point of the day, 1,000 points down would lead one to believe that there must have been something by way of delivery-based selling.
We all have been trying to figure out where the selling is coming in from, because the reported FII or mutual fund figures are not very large nowadays. So, I suspect it was a lot of HNI or domestic retail investor selling, which is going on out there.
If you ask the trading desk today across brokerages, you would hear that there is some delivery-based selling, which has happened from local quarters and maybe some hedge funds as well.
Investors are beginning to capitulate because the market is showing no signs of recovery. Margins are beginning to see quite a bit of local selling which is coming in.
There has been talk of some margin calls today, which is in the system and that might have led to the precipitous fall in many midcap names.
The real big worry was the fact that the midcap index lost 7.5%, and many good quality stocks lost between 12-15%, so maybe there is a lot of co-lateral stock which is getting sold and nargin calls which are filtering back in the system.
There is a complete lack of buying which is why the stock prices are falling on very thin volumes. The other thing to note is that the Nifty future's discount is not very large.
My sense is that this is not a very aggressive Nifty future shorting which is leading the market down from speculators rather institutional or retail delivery based selling on the margin which is why stock prices are coming back. There is just no recovery in sight.
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