The downtrend in the Indian stock market, caused by factors such as steaming crude prices, high inflation and weak global cues, is not likely to rub off on its future prospects that continue to be robust in the long term, say experts.
The Bombay Stock Exchange benchmark index, the Sensex, has dived 11 per cent from the peak of 20,509.09 points in January this year and 13.86 per cent from its all-time high of 21,206.77, scaled on January 10, 2008.
“The Indian stock market is neither expensive nor cheap. The structural story remains intact. It’s only that the recent macro headwinds pose a challenge and, hence, the conviction have waned for those who cannot look beyond a year or so,” said Ashika Stock Broking Research’s head – equities, Paras Bothra.
Echoing similar views, Abhinav Dwivedi, founder and president of Progressive Financial Ventures said, “India commands a huge growth potential, with solid company fundamentals and much improved infrastructure. The long-term perspective is still bullish.”
The bearish sentiment at the stock markets is accompanied by a steep decline in inflows from foreign institutional investors this year.
So far this year, FIIs have sold equities worth Rs 2,274.10 crore. Last year, they had made record investments in the Indian capital market, shows data available on market regulator Securities and Exchange Board of India’s website.
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In 2010, FIIs had purchased stocks and bonds worth around Rs 10 lakh crore, the highest for a year and nearly one-fifth of their overall investment so far.
But market observers believe, “It’s (FII selling) not permanent. In a downtrend, offloading equities is normal.”
“FII flows are likely to remain moderate to weak because of the natural tendencies of equity market as an asset class becoming unfavourable with a high interest rate regime. Moreover, the recent political and corporate fiascos has put the FII flows on tenterhooks,” Bothra said.