`4L cr in­vestor wealth wiped off in two days

Financial Chronicle - - FRONT PAGE - FC BUREAU

Nearly 1,000 point fall in BSE Sen­sex over the past two days have wiped out over Rs 4 lakh crore of in­vestor wealth.

In­dian mar­ket have been fac­ing huge sell­off as worries over es­ca­la­tion of trade war hit in­vestor sen­ti­ment. The bench­mark in­dex slumped 509 points on Tues­day to end at 37,413.

It had lost 472 points on Mon­day, tak­ing the two-day losses to 976 points.

THE Sen­sex’s near 1,000-point tum­ble in the two ses­sions this week has wiped out more than Rs 4 lakh crore of in­vestor wealth in its wake. The mar­ket has seen sur­pris­ingly huge sell-off on Mon­day and Tues­day, as worries over an es­ca­la­tion in trade war and In­dian macros hit in­vestor sen­ti­ment.

The Sen­sex slumped 509 points on Tues­day to end at 37,413, while it lost 472 points the previous day, tak­ing the two-day losses to 976 points.

Euro­pean shares de­clined while most Asian shares ended lower as the spec­tre of a Sino-US trade war haunted in­vestors.

The Nifty fell be­low the 11,300-mark on Tues­day, set­tling at 11,287, down 150 points.

FMCG, metal, bank­ing and auto stocks led the fall on Tues­day. Ti­tan, Tata Steel, ITC, Tata Mo­tors and Power Grid were among the top losers in the Nifty50 In­dex, down be­tween 3 per cent and 4.5 per cent.

“We ex­pect sell­ing pres­sure to set in as the over­all eq­uity mar­ket ap­pears to have run well ahead of fun­da­men­tals, de­spite the out­look for cor­po­rate earn­ings stay­ing pos­i­tive, in our view. We advice in­vestors to book profits in In­dian eq­ui­ties,” said Ji­ten­dra Go­hil, head In­dia eq­uity re­search, Credit Suisse Wealth Man­age­ment, In­dia.

The do­mes­tic mar­ket had a good run in the past months de­spite for­eign funds re­main­ing net sellers in stocks. For­eign port­fo­lio in­vestor (FPI) eq­uity out­flows in FY19 so far have been close to $2.3 bil­lion.

Do­mes­tic MFs were net buy­ers this month, off­set­ting net sell­ing by in­sur­ers and for­eign funds. Flows into mu­tual funds ap­pear to be abat­ing, but are still in pos­i­tive ter­ri­tory. Equity­ori­ented mu­tual funds flows have ta­pered but con­tinue to re­main healthy.

Net in­flows in do­mes­tic eq­uity-ori­ented mu­tual funds in July 2018 were to the tune of Rs 9,700 crore. To­tal in­flows till July FY19 were Rs 49,600 crore.

Ac­cord­ing to an­a­lysts, the mar­ket could get into ma­jor cor­rec­tion as macroe­co­nomic fun­da­men­tals are look­ing bleak from a fall­ing ru­pee and ris­ing crude prices.

“Given In­dia runs a cur­rent ac­count deficit, it re­mains vul­ner­a­ble to bouts of global risk aver­sion. Higher oil prices and port­fo­lio out­flows are its key ex­ter­nal vul­ner­a­bil­i­ties. Aside from th­ese, the key risks stem from the gov­ern­ment turn­ing more pop­ulist ahead of the 2019 gen­eral elec­tions (wors­en­ing do­mes­tic fun­da­men­tals) and a sharper-than-ex­pected do­mes­tic growth slow­down (trig­ger­ing eq­uity out­flows),” No­mura said in a re­port. How­ever, there is gen­eral agree­ment that the long-term In­dia story re­mains quite ro­bust.

“Markets are trad­ing near 20x CY18 (e) and 17x CY19 (e). Th­ese are rea­son­able mul­ti­ples espe­cially in view of im­prov­ing profit growth out­look. Markets thus hold prom­ise over the medium to long term in our opin­ion. Ad­verse global events, sharp mod­er­a­tion in eq­uity ori­ented mu­tual funds flows and de­lays in NPA res­o­lu­tion un­der NCLT are key risks in the near term.

“In view of the above, there is merit in in­creas­ing al­lo­ca­tion to eq­ui­ties espe­cially in large caps or in stay­ing in­vested as the case may be (for those with a medium to long term view and in line with in­di­vid­ual risk ap­petite),” HDFC AMC said in a note.

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