NEW DELHI: Indian stocks suffered their worst July meltdown in 17 years and analysts see little hope of revival in August unless there are drastic policy changes. The bloodbath on Dalal Street continued Thursday with the benchmark BSE Sensex continuing its downward spiral with a fall of nearly 800 points to 36,694 at day's lows, tracking losses in other global markets, but ending 462 points lower, barely managing to hold on to the 37,000 levels.
The BSE Sensex fell by 4.9 per cent during the month of July, while Nifty dropped 5.7 per cent. The fall was sharper for mid- and small-cap firms with the BSE Midcap recording a shrinkage of 7.87 per cent and the smallcap index faling by a whopping 10.87 per cent.
“The market has been falling partly on account of provisions in the budget which spooked investors, especially foreign portfolio investors, partly because the budget did not show any convincing path out of the economic slowdown India is experiencing and in part due to global cues – which too aren’t too good with Chinese demand weakening on the one hand and contrarian signals from the US Federal Reserve authorities,” said Amit Bannerjee, independent merchant representing several East Asian funds in India said.
The worst part, analysts say is that the coming months are not going to be better.
Jaikishan Parmar, Sr. Equity Research Analyst - BFSI, Angel Broking, said, “I do not see any light at the end of the tunnel, unless the Government issues policy clarifications on issues troubling investors.”
Depositories’ data shows foreign portfolio investors pulled out a net sum of ₹14,382.59 crore from equities during July 1-26.
“Banks have become cautious about lending after well publicized cases of defaults, I am told they are getting cautious even on personal and card loans. Automobile numbers released today are extremely poor, indicating the slowdown is continuing. August and September look like a repeat of July’s story,” said Parmar.
India’s much touted growth story is seen as unravelling with the country’s GDP dipping to an anaemic 17-quarter low of 5.8 per cent in January-March 2019 on the back of reduced consumer spending, a slower pace of private investment and government expenditure. Uneven monsoon rains have added to doubts over an early economic recovery.
Credit rating agency CRISIL Thursday cut GDP growth forecast for India by 20 basis points to 6.9 per cent for this fiscal, citing weak monsoon and slowing global growth.
Bannerjee said he expected FIIs to continue to play safe in the coming months, given global cues and india’s own structural problems.
“Global cues are not too encouraging for Asian markets … there is uncertainty over the Federal Reserve’s monetary policy stance as well as weakness in the Chinese economy which we now realize is highly leveraged with debt at more than 3 times the GDP," he said.
A result of the bloodbath in the market has been that investor wealth “has eroded by more than Rs 10 lakh crore “ according to Bannerjee, since the budget was announced.
However he added that the “Reserve Bank of India’s monetary policy stance to be announced next week may drive markets going ahead. Resolutions of bankruptcies and improving bottomlines of banks are also signs of hope.”
July drains cheer from stock markets
BSE Sensex: Jul 1: 39,686.5 Jul 8: 38,720.57 Jul 15: 38,896.71 Jul 22: 38,031.13 Jul 31: 37,481.12 |
NSE Nifty 50: Jul 1: 11,865.6 Jul 8: 11,558.6 Jul 15: 11,588.35 Jul 22: 11,346.20 Jul 31: 11,118 Fall in July: 6.3% |
August 1 performance: NSE Nifty 50: 10,980 (-1.24%) |