Indian equity markets, which witnessed huge volatility through-out the intra-day trade, made a smart recovery during the last trading hours, but ended the day with marginal loses. Markets had opened the day with a positive gap, but later could not hold the drive and slipped into the red terrain. Global developments failed to add cheer to the market even after the Reserve Bank of India announced a series of measures to enhance liquidity as well as credit to the corporate sector.
The Indian volatility index or the India VIX managed by the National Stock Exchange touched an all time high of 85.13 indicating a high level of uncertainty and panic. The VIX indicates the level of volatility in the market and also indicates the sentiment prevailing in the market. At 30% levels, the market is considered to be stable. And at high levels it indicates panic and fear leading to a sell-off.
However, on Monday, the 30-share Sensex of Bombay Stock Exchange (BSE) lost 94.41 points or 1.01% and ended the day at 9,291.01 points. Dealers in the market said that markets plunged after Japan joined the list of economies in recession. Also, G-20 summit on Saturday and Sunday failed to come out with some solid measures to guide the global economy out of the present crash.
The broader S&P CNX Nifty of National Stock Exchange was down by 10.80 points or 0.38% and closed the day at 2,799.55 points. An analyst from a leading broking house said, ?Short-covering and positive opening of European markets boosted the sentiments of the markets during the last trading hours. Numerous measures by the central bank to consider proposal from local firms to buy back foreign currency convertible bonds could not prevent the markets from entering the red territory.? Barring Teck and IT, all sectors in the BSE sectoral indices ended the day on a negative terrain. The Realty and Bankex index were the worst performers of the day. Institutional investors, domestic as well as overseas, were seen doing more of selling than purchasing. Mutual funds were net sellers to the extent of Rs 931.50 crore till Friday, November 14. Foreign institutional investors net sold equities worth Rs 564.20 crore on Monday.
Experts reckon that the selling pressure by the FIIs is likely to intensify as the year closes on and the fund houses will have to close the year for accounts and shore up some good numbers. Hence, there is likely to be some year-end selling. Also, there have been large redemption requests from hedge fund investors as well. The November 15 deadline for redemption requests saw huge amount of takers. Pension funds, endowments and wealthy investors have put money into hedge funds so quickly that industry assets have doubled in about three years.
Hedge funds, which invest around $1.7 billion, are nursing their worst -ever losses, with the average fund down 15% this year, and many investors are punishing the managers for lousy returns. George Soros said that he expects hedge fund industry assets “will shrink by between 50% and 75%.” Hedge funds that focus on Asia saw assets shrink by 13% in the third quarter, vaccording to new data from Hedge Fund Research.