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Volatile Sensex foxes investors

In the past six months the 30-share sensitive index of the Bombay Stock Exchange — Sensex has been witnessing a 300 to 400 point swing — up or down — every fortnight. HT reports. Why this wild swing di?

business Updated: Mar 24, 2012 02:04 IST
HT Correspondent

Volatility, thy name is Sensex.

India's benchmark stock index has been yo-yoing wildly for months now. Reasons are bandied about but no one is answering the real question: Is there a hidden hand that is making the market go up and down for no particular reason?

Retail investors are bewildered and the scenario being painted is a minefield anyway. Global economic uncertainties persist, particularly in sluggish Europe not yet out of the Greek debt crisis; local inflation that is high, delaying an anticipated interest rate cut; diesel prices that threaten the fiscal deficit; a budget that turned up excise and service tax rates to trigger a cost-push inflation — and political scandals such as the spectrum scam and now, questions on coal pricing. http://www.hindustantimes.com/Images/Popup/2012/3/24_03_12-buss25.jpg

In the past six months the 30-share sensitive index of the Bombay Stock Exchange — Sensex has been witnessing a 300 to 400 point swing — up or down — every fortnight.

“The market has not got a clear direction yet, therefore any kind of news will trigger volatility,” said Pankaj Pandey, head of research at ICICI Direct.

In the past, such unexplained volatility has been associated with “operators” or a bear cartel that manipulates market with aggressive attacks so that stocks could be beaten down and bought when low. But no one is sure.

“I have not come across any instance of bear cartel in operation that would be behind the decline in share prices,” said Deven Choksey, , CEO of KR Choksey Shares and Securities, adding things were clearly uncertain. “There are no signs of volatility declining in the coming days.”

“From a policy perspective, the government has not been able to increase railway passenger fares even after nine years. So people will become suspicious about its ability to implement diesel price hike. That is why the market gets jittery,” he added.

Also global investment climate is not in good shape as the latest purchasing managers' index (PMI) for Germany, France and China showed that business activity in these countries is shrinking, raising fears that the global economy may slip into a recession instead of recovering robustly.

Foreign Institutional Investors (FIIs) invested close to Rs 9,400 crore in January and Rs 25, 000 crore in equities in February 2012 while they emerged as the net sellers in December 2011 as they pulled out Rs 2,400 crore from Indian equities. In the month of March (till March 22), FIIs have invested close to Rs 7,000 crore in the equities. So their behaviour has also been unpredictable.

“Like a normal trader, Foreign Institutional Investors (mainly Exchange Traded Funds) are rotating money depending on the returns and the opportunities in the Indian market,” said Choksey.