FPIs have sold nearly Rs 17,000 crore worth of shares in July, and nearly Rs 10,000 crore so far in August, SEBI data shows.
Markets are in a bear grip and the situation is unlikely to change in the near future. The benchmark indices fell more than 1.5 percent each on August 22, while the fall was bigger in broader markets.
The BSE Sensex plunged more than 600 points intraday, falling 587.44 points to close at 36472.93. The Nifty dropped 177.30 points to 10,741.40, dragged down by banking and financials, auto and metals stocks. The Realty Index fell most among sectoral indices, down 6.7 percent.
The Nifty Midcap was down 1.9 percent and the smallcap index fell 2.8 percent as about four shares declined for every share rising on the NSE.
Yes Bank was biggest loser among the Nifty50 with 12.23 percent loss, followed by Vedanta, Indiabulls Housing, Bajaj Finserv and Bajaj Finance which fell 5-8 percent. However, Britannia, Dr Reddy's Labs, Tech Mahindra, TCS and HUL bucked trend, rising between 1 and 2 percent.
"India's problem is macroeconomc adjustment cyclical one and not structural one. It may be extended if global environment softened further," Jan Dehn, Global Head of Readarh, Ashmore Group, said in an interview to CNBC-TV18.
There were no major structural issues in India and country's fundamentals were healthier among global counterparts, Dehn said.
"I quite like what government saying, it is absolutely essential not to allow fiscal hit," he added.
Five factors dragging the market down:
FPI tweaks not enough, needs clarity on surcharge
The Securities and Exchange Board of India (SEBI) has done away with the broad-based eligibility criteria for foreign portfolio investors to simplify the registration process, which is a step in the right direction but the regulator has to do more to bring back foreign investors who needs clarity over the FPI surcharge, experts say.
Foreign institutional investors started pulling out after the budget proposed a higher tax surcharge—from 15 percent to 25 percent—for incomes between Rs 2 crore and Rs 5 crore, and from 15 percent to 37 percent for higher incomes on non-corporate FPIs.
FPIs sold nearly Rs 17,000-crore worth of shares in July, and nearly Rs 10,000 crore so far in August, SEBI data shows.
"Larger factors like taxation are hurting FPIs and we would need to do a lot more to shore sentiment overseas,” Nikhil Kamath, Co-Founder & CIO, Zerodha told Moneycontrol.
“Systemic reform is the need of the hour, and a lot more needs to be done to get FPIs interested again.”
Hopes of stimulus dashed
The market has been rangebound for couple of weeks in the hope of measures to boost the economy, which has been hit by a domestic slowdown and global trade war issues. But, Chief Economic Adviser Krishnamurthy Subramanian has indicated the expectations may be misplaced.
Speaking at the Hero MindMine Summit 2019, Subramanian seemed to rule out a major stimulus package when he said “have to be careful on the issue of a fiscal stimulus".
He emphasised that the government was not expected to intervene every time some sectors went through a sunset phase. Some of the pessimism was not called for, as some sectors were performing, he said.
The Indian rupee went near 72 against the US dollar intraday and hit the day's low of 71.9750 amid consistent FII outflow and weak equities. However, it is good for exporters like IT companies.
The currency fell 31 paise to 71.86 a dollar, though crude oil prices are still favourable for India.
If the fall continues then the market will have a reason to worry because that will result in outflow of foreign funds.
Weak global cues
The US dollar turned stronger against major global currencies after FOMC minutes indicated that Federal Reserve may not be aggressive in rate cuts, dampening the equity market sentiment.
"FOMC minutes on August 21 were hawkish. Most members thought of the cut as an insurance cut or a mid cycle policy adjustment rather than the beginning of a new rate cut cycle. The USD has strengthened against majors. However USD/EM has not got spooked," IFA Global said.
European markets like France's CAC, Germany's DAX and Britain's FTSE were down 0.4 percent each at the time of publishing this copy.
The Nifty witnessed selling pressure for the fourth consecutive day in a row. The index broke below crucial support levels placed at 10,906, 10,800, and 10,750.
The index breaking below the swing low of 10,782, recorded on August 5, does not bode well for the bulls. The next big support will come at 10,580, recorded back in February.
“In case 10,900 is decisively taken off in the next session then the Nifty shall eventually head to make new corrective swing lows below 10,782 levels. However, strength in the index shall not be expected unless it get past 11120 levels on closing basis,” Mazhar Mohammad, Chief Strategist, Technical Research & Trading Advisory, Chartviewindia.in, said.
“For the time being, it looks prudent on the part of traders to avoid long side bets, whereas shorting can be considered if the Nifty trades below 10,900,” he said.The Great Diwali Discount!
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