Indian markets failed to recover from a flash crash on the National Stock Exchange that sent the Nifty lower by over 900 points in early trade. The BSE Sensex declined 120 points or 0.6 per cent to close below the 19,000 mark.
The broader Nifty ended below the 5,750 mark, falling 41 points or 0.7 per cent. The rupee gave us early gains and traded at 51.79 to the dollar.
Markets snapped their four-day winning streak despite the government going on an overdrive on reforms. On Thursday, the cabinet raised the cap in foreign direct investment (FDI) in insurance to 49 per cent (from 26 per cent) and allowed FDI in the pension sector among a package of new measures.
The Sensex opened up but soon witnessed profit taking. Traders took some money off the table because the Sensex had gained nearly 500 points over the last four sessions. So, some consolidation was also expected.
However, the Nifty hit an intra-day low of 4,888 an hour into trade, falling over 900 points from the day's high of 5,815. This led to a brief halt in trading. The NSE attributed the sharp drop in cash market to erroneous orders, which resulted in multiple trades at low prices. Cash prices were frozen for some time because the index hit the lower circuit filter. (Read: What is freak trade in stock markets)
"The market circuit filter got triggered due to entry of 59 erroneous orders which resulted in multiple trades for an aggregate value of over Rs 650 crores. These orders have been entered by a trading member Emkay Global Financial Services on behalf of an institutional client," NSE said in a statement. Shares in Emkay Global Financial Services ended 10 per cent lower at Rs 31.10. (Read: Emkay Global's bad orders trigger brief halt on Nifty)
Sources told NDTV Profit that market regulator Securities and Exchange Board of India was looking into the freak trade and it has sought an explanation from the NSE.
The market was reopened by the exchange with a pre-open phase at 10.00.22 and trading resumed at 10.05.00.
Meanwhile, the BSE continued to work normally though the Sensex was also affected by the sharp fall in Nifty prices initially.
Banking stocks, which have driven the recent rally, shed over 1 per cent. IT stocks also saw sharp cuts, falling over 1.5 per cent on the BSE. Healthcare stocks also closed with over 1 per cent cut.
FMCG major HUL, utility vehicles maker M&M and state-run explorer ONGC were the other stocks to close with over 1 per cent gains.
Mortgage lender HDFC was the top Nifty loser, down 5 per cent on the back of a block deal. US private equity firm Carlyle Group has sold its 3.7 per cent stake in the firm.
IT majors HCL Tech and Wipro, Reliance Infra, Jaiprakash Associates, infra lender IDFC, and drug maker Sun Pharma were the other stocks that declined 2-3 per cent on the Nifty.
Asian markets closed higher as investor risk aversion eased after the European Central Bank said it was ready to buy bonds of troubled euro zone countries, while markets awaited a key U.S. jobs report. Tokyo's Nikkei stock average opened up 0.44 per cent. European stocks also traded higher after a positive start Friday.
(With inputs from agencies)