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India has lagged global equity markets, which have been on the upswing in the past one week. The domestic benchmark equity indices have declined a per cent in the past five sessions.
On the other hand, most European markets have rallied four per cent in dollar terms and US markets have gained about 5 per cent during the same period. Market experts say local factors prevented domestic stocks from staging a comeback.
A $2-billion fraud in Punjab National Bank (PNB), widening of the current account deficit (CAD) to the highest level since May 2013 and MSCI’s threat of cutting India’s weightage in its global indices have weighed on investor sentiment.
Analysts say Indian markets could continue to trade weak due to the uncertainty created by recent events. Banking shares, which have significant weight in the benchmark indices, are expected to be on tenterhooks on fears of the PNB fraud spreading. Also, foreign institutional investors (FIIs) are likely to cut India exposure on the back of the MSCI warning, say experts.
In the past five sessions, FIIs pulled out around $420 billion from Indian equities, more than any other region except Brazil.