Sensex hits 7-month low
Feb. 8: Another day, another fall. On Tuesday both the Sensex and Nifty touched seven month lows — levels last seen in July 2010. And no one is predicting that it will not go lower. The market sentiment is taking a daily hit primarily over domestic concerns ranging from inflation, to fears that Parliament may be stalled again as the stalemate continues between the opposition and the government over the constitution of a joint parliamentary committee to look into the 2G scam.
Even as the scam is playing out, other scams surface giving the impression that the government has not got a grip over the situation. The Sensex closed 261.49 points down at 17,775.70 while the Nifty shut at 5,312.55 down 83.45. The advance decline ratios on the National Stock Exchange showed only 162 stocks closing in the green and 1,154 in the red.
The IIP figures that came out were good but there were indications of slow down in capital formation that is vital to growth. Most of FII money is short term investments and since the Nifty has broken its 200 day moving average and is near its 5,300 support level, the foreign institutional investors (FIIs) see it a good time to exit.
They view all this as a major concerns said Mr Ambareesh Baliga of Karvy Stock Broking. “They are trying to get out and though the domestic institutions are buying, it is not enough,” Mr Baliga said. He said that “so far FIIs have sold $1.8 billion and this has brought the market down about 900 points, one can imagine what will happen after they have taken out $4 billion as is expected.”
Market analysts say FII money came in huge quantities between July-August 2010 even though market valuations were high, because markets were booming. Now when markets are down, there is a reverse trend. Many bankers feel that if the government and the Reserve Bank of India had taken steps to curb the inflow of this short term money, the situation would not have been as bad as it is on Tuesday.
Several countries like Brazil and even China had put curbs on this short term FII money. Mr Rajesh Gandhi of LKP Securities Ltd., said that the Nifty near its support level of 5,300 does not mean that the downward trend has ended. “The process of bottom formation can be said to have started only if the Nifty does not make new lows in the next one or two weeks. On the lower side low levels will depend on the news flow in the coming days,” he added.
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