FM tries to talk up limp stock markets
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Feb. 2: Thursday will reveal whether the efforts of the finance minister, Mr Pranab Mukherjee to roil up the stock markets has succeeded. The markets have been stubbornly negative and January has gone down as the worst month for the markets in 28 months since October 2008.
India was the worst performing market among the Bric countries after Brazil. Most analysts felt that FIIs have been retreating from the markets due to the political and economic uncertainty that has emerged in recent months.
They are also going back to the YS markets are are showing signs of revival and the Dow recaptured the 12,000 mark early this week. Mr Mukherjee had a different take: He said the volatility in the markets was “led by continued selling pressures from the FIIs. While the stock market has its own mind it does take cues from developments all around.” He added the economy will clock 8.5 per cent growth in the current financial year and expressed confidence over the overall performance of the economy and the growth projections for the current year 2010-11.
Analysts see the situation differently. Mape Securities says “Government inaction, worsening deficits, slowing industrial production, low liquidity, stubbornly high inflation and increases in rates have dominated market sentiments, resulting in net FII outflows.”
The last time there was net FII outflow was in May 2010 of $2billion. Sharekhan attributes the negativity in the stock market to a slew of negative-led news like inflation which surged to 8.43 per cent in December 2010 as compared to 7.48 per cent in November, hike in rates by RBI which in turn saw interet-sensitive stock being hammerd and low IIP numbers.
Also, “multiple headwinds on the political and economic front, concerns over moderation in growth and corporate earnings, sparked a sell-off by FIIs.”
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