Indian stocks fall amid weak emerging markets

Analysts, however, see positives in the current account deficit and foreign exchange reserves

Indian shares slumped to a two-month low on Monday, following weakness in emerging markets, as investors turned risk-averse on the region after the US central bank decided to trim its stimulus package.

Sentiment in the Indian market continued to remain cautious after last week’s twin surprises — a 25-basis-point rate rise by the Reserve Bank of India and the US Federal Reserve cutting its monthly bond-buying programme from $75 billion to $65 billion.

Some sections also believe the markets are nervous about talks of the emergence of a third  political front. On Monday, the BSE Sensex closed at 20,209, down 1.5 per cent, while the Nifty closed at 6,001, down 1.4 per cent.

Analysts, however, see some positives. “Indian markets are better off than some other emerging markets, as our current account deficit is not as bad as it was a few months ago. While the rupee has depreciated about 2.5 per cent in the last month, other emerging market currencies have seen much deeper cuts,” said Varun Goel, head (PMS), Karvy Stock Broking.

 

On Monday, Asian markets fell about one per cent; European markets, too, saw losses. Last week, markets in the US closed with a loss of about one per cent. While foreign institutional investors sold shares worth Rs 735 crore on Monday, domestic institutions net sold shares worth Rs 70 crore. Investors were seen selling in the metals, realty and automobile sectors.

Rikesh Parikh, vice-president (equities), Motilal Oswal Securities, said, “Our currency is relatively much more stable; so, we are not seeing any major panic selling in the market. But if global markets weaken further, we could see heavy selling by foreign institutions, particularly in rate-sensitive sectors such as financials, realty, automobiles and capital goods.”