News: Sensex bounces back after 1,100 points crash

(DNA 22/05/2006) Mumbai - The BSE Sensex made a sharp bounce-back of 800 points after 1,100 points crash in the morning and was trading at 10,666, down by just 271 points, at 1338 hrs.

Earlier, the markets crashed this morning falling by more than 1,100 points to below 10,000 level on panic selling, induced by margin pressure.

The benchmark index of the Bombay Stock Exchange (BSE) crashed to a low of 9,827, dipping by 1,112 points, which led to suspension of trade.

The trading was suspended for one hour and resumed at 1300 hrs, leading to a bounce back by more than 500 points and the Sensex climbed back above the 10,000 level at around 1315 hrs.

The National Stock Exchange (NSE) S&P CNX Nifty index fell by 350 points to a low of 2,896. However, it came back sharply, too, to 3,161 points, but was still down by 85 points, at 1338 hrs.

Taking advantage of the situation, many mutual funds were also seen buying stocks at cheaper rates, an analyst said.

Life Insurance Corporation of India was also buying at this opportune moment.

Earlier, trading was suspended in the stock market on Monday, with Sensex crashing by 1,100 points as traders and investors were gripped by panic.

Facing an unprecedented situation and the sharpest ever fall, stock market authorities suspended trading for an hour, first time after May 17, 2004.

The crash followed a statement by Central Board of Direct Taxes seeking to dispel suggestions that its draft circular was ambiguous.

The worst ever crash coincided with the second year anniversary of the Congress-led UPA government.

Just before trading was suspended, the BSE Sensex was quoting at 9,826.91 while the NSE Nifty was at 2,896.45.

The market had opened strongly, recording over 200 points increase, but the slide started within minutes coinciding with CBDT statement thrashing media reports that investors would have to live at the mercy of the tax officials.

It was quoting at 10,274.66 at 1130 hrs.

While rejecting suggestions that the draft circular was ambiguous, the CBDT statement said: "Whether a person purchasing or selling shares/securities is a trader or an investor remains a question of fact.

"The assessing officer would have to take note of the totality of the facts and circumstances before reaching a conclusion," it said.

The benchmark Sensex has lost more than 2,000 points in the last few trading session, including today, following eruption of a controversy on taxation circular put out by CBDT.

The National Stock Exchange Nifty was down about 180 points at 3065.20.