Global quake rocks Sensex, dives 642 pts | business | Hindustan Times
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Global quake rocks Sensex, dives 642 pts

Experts, however, say retail investors are still in the mkt and have not pushed panic button, reports A Kumar. Markets bear all...

business Updated: Aug 17, 2007 02:11 IST
Arun Kumar

Indian shares witnessed one of their biggest daily falls on Thursday, crashing 642 points amid a global markets meltdown and erasing Rs 1,70,000 crore of notional wealth.

Experts, however, said retail investors were still in the market and had not pushed the panic button. It was the biggest fall of the year, second largest in the history of Bombay Stock Exchange.

<b1>Trading terminals were awash in red after the US home loan crisis engulfed markets from Tokyo to New York as traders battled to ascertain the actual quantum of damage. Speculation about more finance companies going bust has rattled traders. The BSE Sensex closed at 14538 points.

Foreign institutional investors, which own 29 per cent of Indian equities and nearly 48 per cent of the floating stocks, were engaged in booking profit in Indian market to reduce the overall losses suffered in other markets.

The FIIs have made huge profits in Indian equities. Their cumulative investment in equities of $58.6 billion, according to data from the Securities and Exchange Board of India (SEBI), is currently valued at $300 billion.

According to Bloomberg, the value of Indian equities has declined by $113 billion, or Rs 4,50,000 crore, to $1.034 trillion, from its peak of $1.147 trillion on July 24.

As per stock exchange data, retail investors own 11 per cent of the total equities. Out of this nearly 4 per cent are sleeping investors. Actual investors who have shares in electronic form, or DEMAT accounts, number 6.8 million and hold about 7 per cent of Indian equities worth $70 billion or Rs 2,80,000 crore.

Analysts said retail investors had three options in a volatile market depending on their staying power. “The retail investors with short-term view of less than a month should exit and wait for the global market to stabilise before taking fresh exposures. Shorter term, it is all about global liquidity supply and resurgence of risk premiums. One should increase the cash components and wait for bargain hunting,” said Amitabh Chakraborty, head of equities, Religare Securities.

Chakraborty said investors with a long-term investment horizon should churn their portfolio, adding that the market was expected to stabilise at around 14,000 points.

Those who have invested through mutual funds are expected to make the money in the long term as these funds are churning their portfolios.

While FIIs are net sellers to the extent of Rs 3,600 crore since July 27, mutual funds have made net purchases of about Rs 600 crore.

“From the global credit perspective, the crisis is bigger than what it appears. Secondly, India is part of global single bowl, if there is global crisis it bound to have ripple effect on India as FIIs becomes an important part of Indian equities,” a senior banker said on condition of anonymity.

However, since the domestic economy is more or less insulated, the current crisis may not impact the long-term growth story, the banker said.