It’s back to the future for the Sensex

By: | Published: January 19, 2016 1:55 AM

The Sensex is back where it was when the NDA government came to power, reports Pavan Burugula in Mumbai. The benchmark closed at a 20-month low of 24,188.37 points...

Pipavav Defence shares, SensexFPIs have sold stocks worth billion in the 12 trading sessions in January and the markets have ended in the red on 11 trading days. (Photo: Reuters)

The Sensex is back where it was when the NDA government came to power, reports Pavan Burugula in Mumbai. The benchmark closed at a 20-month low of 24,188.37 points on Monday as foreign portfolio investors (FPIs) continued to take risk off the table. The Sensex closed the session on May 16, 2014, when the BJP-led NDA government assumed office, at 24,121.74 points.

FPIs have sold stocks worth $1 billion in the 12 trading sessions in January and the markets have ended in the red on 11 trading days despite local funds and insurance companies having been buyers to the tune of Rs 1,380.5 crore.

The Nifty Bank index has lost more than 11% since the beginning of the month.

Deutsche Bank wrote on Monday that unrecognised stress levels in the banking system were high at 12-14%, of which those on account of restructured loans could be around 5% and those on account of SDR between 1.5-2%. “We estimate banks will build about 10% provision on such exposures,” the brokerage observed.

The Street remains cautious although with the correction having been a fairly large one — 7.4% since the beginning of January — some bottom fishing is being recommended..

“We do not rule out a further correction in the Indian market given the confluence of several negative global and local events. However, the correction will offer investors an opportunity to increase exposure to good long-term stocks where valuations are reaching interesting levels. India’s macroeconomic position is quite decent and growth challenges are being addressed. We stick to our view of second-half recovery and 10-15% returns for the year,” Kotak Institutional Equities wrote on Monday.

The brokerage added that apart from concerns about global growth, the macroeconomic condition of emerging markets and the health of the Chinese economy, the correction in Indian markets was also due to heightened concerns about non-performing assets in the Indian banking system.

Gr5

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