Party over for Indian investors?

Recent weakness seen on bourses is causing concern in certain quarters, writes Girish Chadha.

Is the party getting over for the Indian stock investors? The recent weakness witnessed on the local bourses may be touted as a “healthy correction”, but is causing concern in certain quarters.

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The Sensex lost 400-odd points in the past five trading sessions. While data from market regulator Securities & Exchange Board of India (SEBI) does not point towards FIIs pressing heavy sales as yet, some hedge funds and one or two FIIs have already booked profits.

Hedge funds, which often take rather short-term exposure to markets, have been active in the Indian bourses and most have been dealing in shares through P-Notes (participatory notes).

What is causing concern among investors is that indications emerging from the US Federal Reserve point towards rising interest rates. If US interest rates do move up, there is a possibility of some more ‘short-term’ foreign money leaving the Indian bourses.

A more visible downward trend in the days to come will confirm if this short-term money — often referred to hot money in some parts of the world — is indeed leaving the Indian shores.