Narayan Dutt, a Mumbai-based retail investor, used to be a happy man till late January this year. With the sub-prime virus that took birth in the US infecting the wider economy and cutting across global equity markets, Dutt’s days as a happy investor came to an end early this year.
“Days are not good anymore,” Dutt said. “My portfolio is now less than half of what it was at the beginning of the year. I am waiting for the markets to pick up so that I can sell, only if I survive this ongoing crisis.”
With the key equity indices trading about 40 per cent lower from their all-time highs in January, investors remain a worried lot.
With the US Senate voting in favour of the $700 billion bailout plan, stable days would not be far away. But uncertainty in domestic economic and political fronts, could spell trouble. “There are two hypotheses,” said Naresh Kothari, president and head capital markets, Edelweiss Securities. “One is that things should start looking better in the next 45-50 days. But then, with elections around the corner, it may take time for the markets to stabilise and it may not happen till June.”
Even if improved global fund flows see foreign institutional investors return with vigour, certain domestic developments smack off troubled times ahead.
“Mutual funds (MF) are witnessing high redemption pressures and there could be some meltdown in the real estate space as well,” said Gagan Banga, CEO, Indiabulls Securities.
With companies withdrawing funds for advance tax payments and banks moving money from liquid MF schemes to survive a credit crunch, domestic asset management companies are seeing high redemption pressures. Thus, domestic MFs that kept on buying even as FIIs took the exit route, thereby providing a much-needed support to equity markets, could be forced to sell some of their assets to meet redemption requirements. This could trigger another round of selling. FIIs, the major drivers of Indian markets, have sold stocks worth Rs 36,708 crore between January and September.