After Tuesday’s sell-off, the markets look set for more losses ahead, with analysts raising red flags over muted private sector investments and declining exports, and foreign brokerages cutting their growth forecasts.
However, the government’s move late in the day to exempt FIIs from retrospective application of minimum alternate tax (MAT) is likely to boost sentiment. Analysts are also pinning their hopes on lower oil prices and falling inflation, prompting the RBI to cut rates soon.
A record Rs 17,000-crore withdrawal by foreign institutional investors (FIIs) in August was one of the reasons for the sell-off.
“Sentiment was downbeat in reaction to weak GDP data,” said Jayant Manglik, president, retail distribution, Religare Securities. Core sector output also slid to a three-month low of 1.1% in July. Adding to that, negativity on the global front pushed benchmarks lower as the day progressed.”
“Investment growth continues to be on a fragile footing, while consumption is starting to show some signs of a recovery,” Crisil Research said in a note.
While US’ Standard Chartered revised down its 2015-16 growth forecast for India’s economy to 7.3% from 7.7% its Japanese peer Nomura cut its forecast by 0.2 percentage points to 7.8% for the fiscal. Bank of America-Merrill Lynch also warned that poor rains can dent its forecast.
Over the last one month, the Sensex has fallen 8.8%. However, brokers have been advising medium-to-long-term investors to buy at every opportunity.