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RETALIATE AS MARKETS MELT
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Sensex plunges
to near 8-yr low on selling mayhem
Our Markets Bureau
Mumbai, Sept 17: Selling mayhem at the bourses continued
for the fourth day on Monday and sent the benchmark 30-share
BSE Sensitive Index (Sensex) reeling to around its eight-year
low, with players on tenterhooks ahead of the opening of the
US stockmarkets after nearly a week’s forced break.
| Lukewarm response
to govt plans |
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Our Corporate &
Markets Bureaus
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Mumbai, Sept 17: Corporate India,
marketmen and analysts voiced mixed views, laced with
scepticism, on the slew of measures proposed by the government
to restore investor confidence and pre-empt the markets
going into a tailspin when the New York Stock Exchange
resumes trading.
While promoters termed the relaxation in the creeping
acquisition norms as a welcome step, most corporate bosses
say that the crisis of confidence remains. The Financial
Express spoke to a cross-section
of experts for their first reaction.
Says RPG Enterprises chief financial officer (CFO) Hari
Mundra,”The government and RBI has given a measured response
to the crisis. It is important that they are seen to be
in control. With ordinary investors shying away from stock
markets, it was important that FIIs and promoters are
given opportunities.”
However, the issue of crisis of confidence remained, he
added. This sentiment is also shared by others. Gujarat
Ambuja Cements Ltd executive director Anil Singhvi feels
that there will be no positive impact in the short term.
“Currently, market sentiments are as if there is is no
tomorrow,” he said. Analysts and market players felt the
promise to raise the FII investment limit is just an eye
wash and would not help either the FIIs or the corporates.
“The proof is in the eating,” said an executive of a top
FII requesting anonymity.
“If these steps are announced they are good for the long
term, but they should be implemented and not just remain
on paper,” he said. Adds a the fund manager of a mutual
fund affiliated to one of the leading industry houses:
“Given the current state of affairs of the equity markets
worldover including India, the FIIs may not be interested
at this stage to increase their investments to 74 per
cent.
Says Telco senior vice president (corporate affairs) Praveen
Kadle said, “FIIs usually take a view in much larger context,”
adding that how much these measures will help revive the
stock market is questionable as markets are down not because
of regulatory issues but due to apprehension of war and
consequent impact on the oil prices, rupee exchange rate
and on the general global economy including India.
Adds Emkay Shares and stock Brokers’ analyst Nauzad Irani
said, “Sebi is late to react to the FIIs’ move, and if
allowed, it would be like using life saving drug after
the patient is dead. Also, foreign investors would prefer
to divert their funds to more stable and less riskier
European markets and not stay in riskier and highly volatile
markets.”
Marico Industries CFO Milind Sarwate said, “In Marico
the FII investment has never exceeded around 3-4 per cent.
Also there may not be a significant impact of the same
in our company. On a broader level, with the threat of
a war looming large on the sub-continent, any number of
incentives will not create an atmosphere to attract foreign
capital.”
Dileep Choksi partner CC Choksi and Co and Deloitte Haskins
and Sells said,” Merely increasing the limit for FIIs
is not likely to have any major impact on the stock market
until and unless the general confidence of the retail
equity investor is restored.” The main issue is availability
of investible funds which is key to revival of the stock
market, he felt.
A Tata Sons senior vice president (who did not wish to
be quoted) said that although both measures are positive
steps, their impact depends on how the Indian market is
going to evolve in the next few weeks vis a vis the political
developments around the globe which in turn, has made
the timing for these forward looking steps bit unfavourable.
Adds Indian Rayon CFO Adesh Gupta,” At this particular
point of time ,it would be difficult to say how the stock
markets will react particularly because of the situation
prevailing worldwide”. However, in the long run, the decision
of the finance ministry will definitely be a big booster
for the our boursess, he said. |
The Sensex plunged a hefty 149.98 points on a day of all-round
selling, to close at 2680.98 points, down over 5 per cent
from Friday’s close of 2830.12.
The US markets have been closed since the aerial attacks on
New York and Washington on Tuesday last. Fears of a US retaliatory
attack on the Taliban government in Afghanistan have also
been haunting the Indian markets of late, leading to a bloodbath
on the stockmarkets. As many as 446 stocks touched their 52-week
lows as large-scale selling gripped the markets.
The National Stock Exchange (NSE) Nifty CNP Nifty too witnessed
similar volatility before settling the day at 872.25, down
5.16 per cent from previous close. The lowest level seen by
the Sensex prior to this was on January 29, 1993, where it
closed at 2680.79.
Traders said as tension escalates there could be further selling
of Indian stocks, primarily by US-based funds and India-specific
funds on Tuesday, wherein operators and FIIs would be rushing
to exit from Indian equities in a big way.
The finance ministry’s move on Sunday to take steps to boost
the markets by hiking the FII investment limit and look at
the possibility of introducing margin trading had little impact
on the overall sentiment.
While selling was across the counters, including technology
and media counters, there was a surprise in the form of heavy
buying witnessed on the Reliance counters. The resultant climb
in RIL stocks on Monday to Rs 262 from Friday’s close of Rs
269 prevented the Sensex from dipping further.
The absence of support from local institutional investors
and banks saw the Sensex open 72 points lower at 2758.16,
which was also the day’s high. It touched a low of 2640.58
before settling for the day at 2680.98, down 5.27 per cent.
A large number of stocks, including Moser Baer, Hughes Software,
CMC Ltd, Polaris and Global Telesystems, all technology scrips,
were stuck at the 20 per cent lower circuit, while ACC, Infosys
Tech, NIIT, Satyam Computer and SBI were locked in 10 per
cent lower price band at close. In the specified group, 169
including 28 index-based counters registered hefty losses.
Since the past week or more, FIIs have been net sellers of
Indian stocks worth around Rs 200 crore. Of this, on Friday,
the FIIs sold Rs 278.70 cr and bought Rs 168.90 cr, giving
a massive negative net investment of Rs 109.80 crore on just
one day (Friday, Sept 15).
“This is nothing but panic and redemption-based selling,”
said an executive of a top US-based fund major requesting
anonymity. “The US government and the Securities and Exchange
Commission (SEC) steps on Monday would give direction to local
players and FIIs tomorrow (Tuesday)”.
Following the aerial attacks on the USA last Tuesday, most
of the US-based funds operating here are understood to have
been asked to stay liquid and keep more cash than equity stocks.
“Coupled with the possible downslide in stockprices in majority
of the equity markets of the world it is but natural for the
fund manager to keep more cash than equity,” said an operator
on the equity desk of a leading FII.
“All possible factors, including war with Afghanistan-based
Taliban have been factored in the recent selling and have
been discounted,” said a market source. “Given this and the
impending positive steps expected to be announced and implemented
by the USA government and the Securities Exchange Commission
(SEC), we hope Tuesday (tomorrow) would be the last day of
more selling by US-based institutional investors.”
Said a fund manager of a local mutual fund: “Amidst this,
the net asset values of mutual funds are linked to the overall
market developments and the Sensex. However, the decline in
MF NAVs at around 9-11 per cent is surely better than the
12 per cent plus decline in the Sensex over the past few days.”
Although there is disagreement over whether the FIIs were
sellers in the market on Monday, few names have been making
rounds in the market including Janus Capital, Morgan Stanley
and Schroeder.
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