Indian markets in Thai soup?

Tuesday saw a strange beginning. The markets opened 100 points down and by afternoon the markets nosedived a good 429 points. The markets seem to have reacted to the news of Thailand Central Bank issuing a notice yesterday. The Thailand bank has stated that 30% of the total FII money invested would be held by banks and will subject to a 33% penalty in the event of an investor withdrawing the amount in less than a year. This means, overseas investors buying baht will only be able to invest 70% of what they transfer and recoup all their funds if they keep the money in Thailand for more than a year. Following the news Thailand market went in red.

Thereafter, a chain reaction triggered leading to a fall in all Asian markets. In India, all sectoral indices were down during afternoon trade. Forty-Nine of 50 Nifty stocks were in the red. If we look at the FII figures for this month, we find they have been net sellers. Till December 15,  FIIs had sold  equities to the tune of Rs 1406.50 crore, while mutual funds sold to the tune of Rs1087.30 crore. Last time when FIIs had turned net sellers was in the Month of May when equities worth Rs 8247.20 crore was sold.

So is there a real fear of hedge funds and FIIs pulling out of Indian and other emerging markets? Deven Choksey of KR Choksey Shares and Securities certainly finds this absurd. Speaking to CNBC TV 18, he says markets are clearly trying to establish direction ahead of third quarter results and probably because of vacation in December, people are a little bit cautious, resulting in the sideways movement of the markets. He does not have any liquidity concerns.

Vibhav Kapoor of IL&FS blames the Thai situation to some extent. Talking to CNBC TV 18 he says," ...Thai situation is not helping at all because that probably has imposed some nervousness into the Asian markets as a whole. So the risk aversion probably is gone up because of that."

 

-By Jhini S. Phira