Market Fall Widest In 18 Months
Eighty per cent of the listed stocks and 68 per cent of the 110 sectors regularly tracked by the Business Standard Research Bureau underperformed the markets last month. They posted losses larger than the 9.9 per cent fall in the equity indices between July 2 and August 2, 2002.
This has been by far the widest fall in stock prices in the last one and half years. During this period, there have been three instances of the equity indices falling by over 10 per cent, but the latest fall has been the widest in its reach.
When the market declined 15.57 per cent between August 28 and September 28, 2001, only 46 per cent of stocks and 18 per cent of the sectors underperformed the markets.
Even during the steep 21.31 per cent fall between February 28 and March 30, 2001, around 59 per cent stocks and 46 per cent sectors underperformed the market.
The one common factor in all three market falls is that software stocks were the biggest losers. These stocks fell by more than double the size of the overall market fall.
For example, between July 2, 2002, and August 2, 2002, the market declined 9.9 per cent, but software stocks depreciated 20.18 per cent. Between August 28, 2001, and September 28, software stocks fell by 35.35 per cent compared to the market fall of 15.57 per cent. Between February 28 and March 30, 2001, while the market fell 21.31 per cent, software stocks declined by 42.02 per cent.
Among the big market cap index stocks, Wipro was the most affected on all three occasions. In the current bear market, Wipro declined 26.43 per cent to close at Rs 1,087.55 on August 2. On the earlier two occasions, the stock fell by 29.69 per cent (August-September 2001) and 47.57 per cent (February-March 2001).
Hindustan Lever, which outperformed the market on the earlier two occasions, underperformed this time with a 10.75 per cent decline in market price. ITC, however, lived up to its reputation of being a safe bet, outperforming the market with a modest fall of 2.24 per cent between July and August 2002 and appreciating by 4.71 per cent in February-March 2001.
The current fall in the market has been widespread, largely owing to accounting scandals that have impacted investors' confidence.
Foreign institutional investors seemed scared of investing in the Indian market. During the last one month, FII net buying in the stock market was Rs 268 crore, versus net buying of Rs 2,130 crore during February 28 -March 30, 2001.
The local mutual funds, facing redemption pressure themselves, were net sellers to the tune of Rs 289 crore during the last one month.