“It is a sell-off, plain and simple,” says Prakash Diwan, Head of Asit C Mehta's Institutional client group. “Roughly for every Rs 1 crore worth of equity bought by domestic institutions, FIIs have sold Rs 2 crore in the last three days, and that says it all.”
The BSE Sensex fell 298 points, or 1.84 per cent, over its previous close to end Friday at 15,849 points. This is the first time that the Sensex is closing below the 16,000-mark after February 10.
With FIIs facing redemption pressures in their parent markets, an exodus of hot money was waiting to happen, said experts. There was consensus that fund management was getting tougher by the day, especially when it came to outperforming the benchmark indices.
On Friday, the FIIs were net sellers of equity for Rs 226 crore on the NSE and the BSE, while DIIs were net buyers for Rs 393 crore.
Retail investors were net buyers for Rs 31 crore on the BSE. This segment is being advised to wait for fresh lows. A medical practitioner said he told by his broker to enter the stock market only after the Sensex touched 14,000 levels.
“There were opportunities to buy some blue-chip stocks today but overall the sentiment has been lacklustre after Moody's downgrading Japan,” said Mr Ashish Choudhary, a retail investor.
Indian bourses were continuously in the green from 9-27 a.m. to 11-34 a.m. hours before slipping into the red as European markets opened negative.
Even among the more regular traders, there was bewilderment. “I am clueless about this whole business of global cues affecting Indian markets. In spite of Europe and US holding on at about the same levels in the last one week, India has been falling consistently,” complained a Chennai-based day trader.
Volatility index
The volatility index India Vix was up 19 per cent and ended the day at 33.26 points, up 5.32 points over its previous close.
Economic indicators are not showing healthy signs, said experts. India's savings-to-GDP ratio went below 10 per cent due to high inflation and poor returns from banks' savings account deposits. If a decision on deregulating deposit rates is not taken, banks are in for tougher times ahead, said experts.
In India, asset prices have fallen in the financial economy more than in the real economy. “Stocks have eroded by 25-40 per cent in value in August, if one leaves out the consumer and telecom sectors,” said Mr Gopal Agarwal, CIO and Head Equity, Mirae Asset Global Investments (India).
In ‘value zone'
“The market is in a value zone now and is looking at a significant trigger to bounce back. For investors, it makes sense to pick up some good quality stocks but for traders the pain will continue for some more time.”
Finally, a lack of policy direction from the government has also put off market men. “The Government has hardly worked since last December after a series of scams broke out,” said Mr Rikesh Parikh, VP-Equity, Motilal Oswal Securities.