Markets log worst July in 17 years amid worries of a further slowdown

MUMBAI: Indian equities were under severe selling pressure in July because of worries over a slew of budget proposals and a further slowdown in the economy. The benchmark index Sensex was down 4.86% and the Nifty slipped 5.69% in July, the sharpest monthly decline since October last year.

This is worst performance of stock markets in July in 17 years. In July 2002, the Sensex had fallen 7.92%.

It was worse for smaller companies—bse Midcap and BSE Smallcap indices were down 7.87% and 10.87%, respectively, in July.

Analysts are worried about market weakness because of tightening credit supply, weakening business sentiments, weaker investment cycle, and slowing global growth.

Foreign institutional investors rattled by the Union budget proposal to increase the surcharge on super rich tax payers were net sellers in July to the tune of $1,623.13 million. However, domestic institutional investors, including mutual funds and insurance companies, were net buyers of Indian shares worth ₹17,915.14 crore.

The sharp decline in markets was despite favourable factors like the currency and crude. In July, the rupee was up 0.34% and crude prices were down 2.15%.

“There were no big bang reforms or any major stimulus in the Union budget. On the contrary, the increase in surcharge and the proposal to raise public shareholding from 25% to 35% have dampened investor sentiment and led to a sharp correction post budget,” said Rusmik Oza, head of research, Kotak Securities Ltd.