Risk averse FIIs spill blood on St.
Feb 03 2014 , Mumbai
Market will remain volatile till general election
Foreign investors looked for exits from risky assets after the US Fed decision last week to cut stimulus bond buying by another $10 billion to $65 billion a month.
Analysts say the Indian market will be volatile till the general election in May. Besides, lack of any other major events means investors will tread cautiously from hereon.
The rupee also weakened, amid fears of fund outflows following the US decision.
The Sensex was down 304.59 points (-1.48 per cent) at 20,209.26, the lowest since November 13 when the index had closed at 20,194.40. Likewise, the Nifty was down 87.70 points (-1.44 per cent) at 6,001.80, after slipping below the psychological 6,000-mark intra-day.
The BSE metals index, the biggest loser, was down 3.06 per cent, as weaker data from China triggered selling pressures in metal stocks. China’s PMI (purchasing managers’ index) decreased to a six-month low in January as output and orders slowed, Bloomberg reported.
The other big losers were the BSE realty index (-2.09 per cent), the BSE auto index (-1.88 per cent), the BSE IT index (-1.64 per cent) and the BSE bank index (-1.35 per cent).
Bloomberg said that for emerging market this was the worst start to year since 2009. The Turkish lira and South Korean won weakened, and copper headed for its longest losing streak in 18 years, it said.
“The Indian markets will be volatile till the general elections. The absence of any big triggers will also hit sentiment,” said Vikas Khemani, president of Edelweiss, said. “The elections will be critical,” he said.
FIIs had sold a net Rs 792 crore worth of shares on Friday, according to Sebi data. On Monday, they sold net Rs 735.73 crore more, according to provisional data.
Gaurang Shah of Geojit BNP Paribas said global weakness, coupled with the gradual withdrawal of the US stimulus resulted in foreign investors becoming net sellers in the Indian market.
“The liquidity issue due to the cut in stimulus impacted our markets and may hit our currency in the coming days,” he said.
With elections approaching, the government was also announcing populist steps, which might hamper industrial production and GDP data, he added. On the day the government reduced CNG prices by Rs15 a kg and piped cooking gas by Rs 5. Last week the government increased the number of subsidised gas cylinders to 12 from nine a year.
“There is a feeling that the government will announce more populist measures,” said Shah.
After the US tapering “India seems to be in a better state as far as currency stability is concerned with regards to capital flight,” said Ashika Stock Broking in a note.
“The era of easy money is coming to an end and there is a growing fear that the emerging nations will have to bear the brunt of this fund outflow. However, the adverse effect will be particularly felt by emerging nations with high levels of external debt. Asian economies are perceived to be in a better shape than Latin American economies,” said the note.
As for stocks, Shah said, “The sell side is deeper and the buy side is shallow.”
“The Nifty opened with a negative gap down and the market sentiment remained weak for rest of the trading day. Intra-day support was seen at 6,050. However, once that was broken, further selling pressure was seen and Nifty fell below 6,000,” said Nidhi Saraswat, senior research analyst at Bonanza Portfolio.
HDFC, Infy, ICICI Bank and Tata Motors were some of the major losers. Hindalco was the top loser in Sensex, down 5.48 per cent at Rs 103.55 apiece.