Markets back to August 2014

Foreign investors continue pullout, despite MAT relief

The benchmark indices are down to levels seen nearly 13 months earlier, after the 10 per cent fall in the past month due to risk aversion created by worries over China's slowdown.

Declining for a third day, the BSE exchange's benchmark Sensex on Wednesday fell 243 points or nearly one per cent to 25,453.6, its lowest close since August 8, 2014. The National Stock Exchange's Nifty ended 69 points or 0.9 per cent lower at 7,717, lowest since August 11, 2014.

Despite opening higher, the markets failed to hold on to the gains as foreign investors continued to sell Indian equities despite the government concession on the retrospective tax controversy.

Finance minister Arun Jaitley on Tuesday after the market closed said the Centre had accepted the A P Shah panel's recommendation to waive retrospective imposition of Minimum Alternate Tax (MAT) on foreign funds. All pending MAT cases against foreign institutional investors (FIIs) would be dropped.

Yet, this failed to stem the outflow of capital from the domestic market, given the weak sentiment due to economic woes.

On Wednesday, FIIs sold shares worth Rs 1,573 crore, extending this week’s selling tally to Rs 2,800 crore. In August, they'd pulled out Rs 16,700 crore from Indian equities, causing a 6.5 per cent plunge in the benchmark indices.  

“The MAT relief was factored in by the market. There aren’t too many negative triggers domestically and the Indian market is guided by international events,” said U R Bhat, managing director, Dalton Capital Advisors.

The markets have seen a spate of downgrades over the past week. Barclays, Ambit, Macquarie and CLSA are among the brokerages to have scaled down their year-end target on the Sensex or Nifty.

Yogesh Radke, head of quantitative research, Edelweiss Securities, believes the Nifty could go below 7,600. “The markets have been under pressure on the back of FII selling. Since August 7, FIIs have pulled out Rs 22,600 crore, resulting in a near 10 per cent fall. The selling is stoked by the fears of a global slowdown and concerns over the (US) Fed liftoff. The Nifty can see limited downside till 7,550, a key support level. We could see a sharp bounce from that level after or around the (next) Fed meeting. Investors can start accumulating stocks but should restrict themselves to large-caps,” he said.

The broad-based BSE mid-cap index fell 0.8 per cent, while the BSE small-cap index gained 0.15 per cent on Wednesday. The overall market breadth was weak; there were 1,188 gainers and 1,448 losers among the stocks traded.

Among the blue-chip index stocks, Bharat Heavy Electricals fell the most at 5.1 per cent, followed by Mahindra & Mahindra  and Oil & Natural gas Corporation which declined 3.6 per cent each.  Among sector indices, the banking index fell 1.8 per cent and the power index dropped 2.4 per cent, while the BSE information technology index gained 1.2 per cent.