MUMBAI: A joke doing the rounds of Dalal Street is that it is the stock market that is leading the fight against inflation: by way of lower share prices. But that is hardly any comfort for investors, who continued to panic over the steadily mounting inflation figure. In a booming market, the same investors would have told you that high inflation is not a bad thing as it is a reflection of the rapid growth in the economy. But this logic has no takers when FIIs are in retreat, high interest rates threaten to hurt demand in the economy, and the world markets are in a state of flux.
Capital goods—considered the last bastion of the bulls—came under heavy attack on Friday, as equity benchmarks tumbled over 3%. The Sensex shed 489.43 points to close at 15,343.12 while the Nifty fell 124.60 points to close at 4,647.
The 30-share BSE Sensex shed 489.43 points to close at 15,343.12 while the 50-share Nifty fell 124.60 points to close at 4,647.
After some heavy purchases last week, FIIs appear to have lost their appetite for Indian equities. Provisional data reveal that they net sold nearly Rs 850 crore worth of shares on Friday. While domestic institutional investors used the weakness in the market as opportunity to mop up nearly Rs 580 crore worth of shares, the near-term outlook on the market remains bearish.
“The meltdown on Friday has more to do with technicals than fundamentals,” says HDFC Securities director Abhay Aima.
“No doubt inflation is a concern, but a lot of the concern is built into the valuations. Corporate earnings are expected to grow 15-18%, but (PE) multiples in most cases have shrunk below those levels. As such, markets look attractively valued.
Going forward, one can expect a lot of volatility. However, globally, with most bad news priced in, one should not be surprised if you see an index of 20,000 by the year-end,” he added. Traded turnover on both exchanges combined was around Rs 50,000 crore, compared with around Rs 48,000 crore the previous day. Dealers said day traders have scaled back their commitments considerably because of a combination of uncertain market conditions and added pressure on their margins as a result of the removal of tax rebate on securities transaction tax.
This has reduced liquidity in the market further and is fuelling volatility, brokers say.
Power, banking, automobile and realty shares took a beating, with the respective sectoral indices falling 2-3%.
There was some respite for metal shares, after steel companies agreed to roll back prices selectively, in a bid to avoid some of the price control measures announced by the government.
Brokerage house Morgan Stanley has retained its overweight rating on Sail, Tata Steel and JSW Steel despite the partial rollback in steel prices. “We would view near-term stock price weakness as an especially attractive opportunity, as price hikes taken year-till-date should help ensure strong earnings growth in FY09 for the three companies,” the Morgan Stanley note said.
Capital goods—considered the last bastion of the bulls—came under heavy attack on Friday, as equity benchmarks tumbled over 3%. The Sensex shed 489.43 points to close at 15,343.12 while the Nifty fell 124.60 points to close at 4,647.
The 30-share BSE Sensex shed 489.43 points to close at 15,343.12 while the 50-share Nifty fell 124.60 points to close at 4,647.
After some heavy purchases last week, FIIs appear to have lost their appetite for Indian equities. Provisional data reveal that they net sold nearly Rs 850 crore worth of shares on Friday. While domestic institutional investors used the weakness in the market as opportunity to mop up nearly Rs 580 crore worth of shares, the near-term outlook on the market remains bearish.
“The meltdown on Friday has more to do with technicals than fundamentals,” says HDFC Securities director Abhay Aima.
“No doubt inflation is a concern, but a lot of the concern is built into the valuations. Corporate earnings are expected to grow 15-18%, but (PE) multiples in most cases have shrunk below those levels. As such, markets look attractively valued.
Going forward, one can expect a lot of volatility. However, globally, with most bad news priced in, one should not be surprised if you see an index of 20,000 by the year-end,” he added. Traded turnover on both exchanges combined was around Rs 50,000 crore, compared with around Rs 48,000 crore the previous day. Dealers said day traders have scaled back their commitments considerably because of a combination of uncertain market conditions and added pressure on their margins as a result of the removal of tax rebate on securities transaction tax.
This has reduced liquidity in the market further and is fuelling volatility, brokers say.
Power, banking, automobile and realty shares took a beating, with the respective sectoral indices falling 2-3%.
There was some respite for metal shares, after steel companies agreed to roll back prices selectively, in a bid to avoid some of the price control measures announced by the government.
Brokerage house Morgan Stanley has retained its overweight rating on Sail, Tata Steel and JSW Steel despite the partial rollback in steel prices. “We would view near-term stock price weakness as an especially attractive opportunity, as price hikes taken year-till-date should help ensure strong earnings growth in FY09 for the three companies,” the Morgan Stanley note said.
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