Bearish sentiments among Indian investors appear to be escalating everyday. Domestic factors, including high inflation and slowing growth, coupled with a weakening rupee, pushed the Indian benchmark indices to a two-year low on Wednesday. Most frontline stocks have already seen a fourth of their value erode in the recent past.
Market players are of the view that foreign firms and mutual & hedge fund managers in the US and Europe are selling their emerging market investments, including those in India, and building up cash positions in anticipation of further redemption pressure from retail and institutional clients. Provisional data showed that foreign institutional investors (FIIs) sold Indian shares worth a whopping Rs 1,186 crore on Wednesday.
“The expectation is that we are approaching a Lehman-like moment in early 2012, if or when major European financial institutions face severe stress as a consequence of sovereign bond spread widening and/or a credit rating downgrade for French sovereign bonds. To provide for this, emerging market exposure, including that to India, is being slashed,” said Arjuna Mahendran, the Singapore-based investment strategy head for Asia at HSBC Private Bank.
The 30-share Sensex of the Bombay Stock Exchange (BSE) lost nearly 600 points during the day to touch a low of 15,479, before closing at 15,700, down 365.45 points, or, 2.3 per cent. This is the lowest close for the Sensex since November 3, 2009, when it closed at 15,404.9. It has lost nearly 12 per cent since its close of 17,804.8 on October 28. The broader 50-share Nifty of the National Stock Exchange settled the day at 4,706.45, shedding 2.2 per cent, or, 105.9 points.
Stocks like Bharti Airtel, BHEL, HDFC Bank, Wipro, ICICI Bank, Infosys, L&T, ONGC, RIL, SBI and Tata Motors lost two-four per cent each. Amid 2,000 stocks lost ground on the BSE, as against just 761 gainers.
“The headline macroeconomic indicators are giving weak signals, mainly due to a contractionary monetary policy and an expansionary fiscal policy,” says Devesh Kumar, managing director and head (equities), RBS India. “The global problems are making investors look for stable economic zones where local signals are not comforting,” he adds.
Meanwhile, the rupee pulled back on Wednesdsay on suspected central bank intervention, the near-term outlook remained bearish. It settled at 52.4, marginally lower compared to the previous close of 52.3.
The fall in the Indian indices was in line with that in other Asian and European indices. While the Hang Seng lost 387 points, Taiwan Weighted was down 194 points. Most European indices also traded in the red for the entire session.Fears of a global economic slowdown also returned after gloomy data poured in from Germany, China and the United States. While Germany failed to get sufficient bids at an auction of benchmark 10-year bunds, US growth data was revised downwards. Further, a survey showed China’s factory sector shrank the most in 32 months.
