Expect unprecedented instability ahead, warn FIIs

Terming the global market crash an unprecedented crisis, Citigroup analyst Paul Chanin today said investors “should probably expect unprecedented instability”.

Foreign institutional investors (FIIs) have been on a selling spree and today they were net sellers to the tune of Rs 2,513.73 crore. They have offloaded Rs 7,356 crore worth shares on the domestic bourses in the last six trading sessions.

Global markets are in the red and some indices have touched their two-decade lows. The BSE Sensex has lost 1,998 points or 15.95 per cent in the last one week. Stocks have crashed the world over despite central banks and governments making concerted moves to soothe the markets.

“The equity asset class is seeing the worst period in history due to global risk aversion and de-leveraging. There is a loss of confidence among clients on equities and fixed income investments,” said Yogesh Kalwani, vice-president, BNP Paribas Private Banking, India.

Risk reduction and re-alignment of portfolios are a top priority for investors, said Kalwani, adding, “We are reviewing our clients’ investments and asset allocations with an objective to reduce risk and re-align their portfolio according to the revised market scenario,” he said. His advice to investors is to lock in the current attractive debt yields for a couple of years, accumulate equity in the next two to three quarters with longer-term perspective and have gold in the portfolio with a two-year horizon.

“We should also probably take comfort from the way the rational behaviour always returns to the markets,” said Chanin.

A representative of a leading FII said, “Most selling has been sentiment-driven, but we have observed that most selling has been without thinking. There is a lack of knowledge among retail and HNI investors everywhere about the implications of the developments.” He added: “Their priority has been to generate cash and be risk-free.”