Technical rally in offing
Stay put at holdings for coming weeks The foreign institutional investors (FIIs) turned net sellers of equities on the Indian bourses last week...
Stay put at holdings for coming weeks The foreign institutional investors (FIIs) turned net sellers of equities on the Indian bourses last week thus pulling the Sensex down by 386 points to close. The FIIs started selling stocks on worries generated due to multiple negative factors, including political uncertainty and a likely war between South and North Korea. The increasing current account deficit was yet another point of worry for both the government and the FIIs as it continued to take a toll on the value of the Indian currency in the currency market. The FIIs that earned a fame of net buyers all through 2012 and early 2013 and continued to buy even till Tuesday the last week turned net sellers from Wednesday and off-loaded big chunks from their holdings. The total change in the stance of the FIIs caused small and big individual investors also turn into net sellers. Such selling was more in small and mid-cap scrips that plunged drastically down. These individual investors were also of the opinion that the political uncertainty might bring the Lok Sabha elections early. They also worried about the poll verdict as in the absence of any wave in favour or disfavour of any particular party, the new government would also be unstable and the economic reforms would be delayed further. Earlier in the preceding weeks, the numbers pertaining to the sales of the automobile companies, cement despatches, core sector production, purchase managers' index (PMI) etc. turned out to be negative and depressing for the stock market sentiments. The CAD increased to a last few years' high. This really caused worries in the minds of the FIIs and that made them to sell significantly. Besides, they also eyed other safe destinations for parking their funds. FIIs are selling as the chances of GDP growth to over 8 per cent looked difficult, which support by the Prime Minister Manmohan Singh who said addressing the CII last week. He said the current GDP is five per cent and his government was trying hard to enhance it to eight per cent but with the political situation being highly fluid, it would be very difficult to achieve this target. While Rahul Gandhi, who also addressed at CII failed to invoke confidence among in the industrialists and also the stock market investors. However, all these external and macro level worries are most likely to subside once the corporate number season kickstarts in April. If corporate numbers season starts on a positive note, the markets may not fall further and instead find support at the lows. The Sensex is most likely to hold the last week's low of 18389 in normal situation, i.e. in the absence of any untoward incident in any place in the world including Asia and India. Therefore, the individual investors who have not sold their shares when prices were really high, need not sell now when they are significantly down as they are most likely to stage a technical rally in the new week.
9 Dec 2019 12:12 PM GMT