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Market Moves - Still Clouded Over

By Shailendra Lotlikar | 10/10/2011 5:56 PM Monday

The US economy is stronger than you think, Greece will be restructured and institutions won’t be hit”. This is what Jamie Dimon, Chief Executive, JP Morgan Chase, was reported to have said recently. Ideally, one would have expected the market to react positively to this pro-market prophecy, coming from the head of an institution that had managed to emerge unhurt in the 2008 financial crisis. However, the market did exactly what it ought to have done in the present circumstances. The Sensex tanked 287 points, while the Nifty was down 77 points on Tuesday (4th October, 2011). There were reasons for this – the ratings agency, Moody’s Investors Service, had downgraded the standalone rating for State Bank of India, the country’s top lender, citing its “modest” capital and weakening asset quality. This was enough to send an already jittery market into a tailspin.

Of course, market declines have ceased to be surprising. The negativism surrounding the market is just not ebbing. Fears of a double-dip in the US and the woes of the Euro zone continue to stalk the market. In fact, the market has ended in the black on just a single day during the fort-night (between 21 September-4 October, 2011). Overall, it lost a humungous seven per cent during the fortnight, with the Sensex posting a 1200-point decline, while the Nifty was down 361 points. Mid- and Small-Cap stocks met with identical fates. The BSE Mid-Cap Index was down 8.34 per cent, while the BSE Small Cap Index declined 8.80 per cent over the fortnight.

IT stocks are probably riding the positive sentiment surrounding export-driven companies, thanks to the declining rupee. The BSE IT Index declined the least during the fortnight, having gone down by just around 0.94 per cent. FMCG companies too, put up a comparatively better show. The BSE FMCG Index was down 3.41 per cent, followed by the BSE Healthcare Index, which declined 4.09 per cent over the fortnight. This is all that can be said to have been positive about the market during the past fortnight. Realty and bank stocks have been hammered down mercilessly during the period. The BSE Realty Index was down 9.18 per cent, while the BSE Bankex declined by 10 per cent over the fortnight. The most surprising element was the decline of consumer goods and consumer durables stocks. Both, the BSE CG Index and the BSE CD Index, ended down by 11 per cent. Metals were the worst per-formers, the BSE Metals Index having declined 16 per cent over the fortnight.

FIIs are still elusive, and this is what is creating a real pressure on the Indian market. The FIIs were net sellers in Indian equities, to the tune of USD 541 million, while their Indian counterparts, the Mutual Funds, bought equities worth 258 crore during the fortnight. Unless the trend reverses substantially, there is no way that the Indian market can stabilise and look to move up. Will the dollars come in? Not at least for now.

What next? Well, wait for the Q3 results to start trickling in. These, too, are not expected to be very exciting, but remain the immediate triggers for the market. Volatility is here to stay. Do not venture into the markets without your safety belts on. Sit tight and wait for the signals to be right. In fact, the auto stocks are worth watching closely. The September sales numbers that have come up seem to be a bit surprising, on the positive side.

 

Find More Articles on: DSIJ Magazine, Market Moves, Markets, Market Outlook, Product, Mid Cap

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