Market crash: Investors lose Rs 4,06,000 cr

pratikbharti

pratikbharti

Pratik Bharti
The downslide at the stock market continued unabated for the third day today with jittery foreign investors resorting to huge sell-off in the aftermath of regulator SEBI's proposals to curb overseas inflows through instruments like participatory notes.

Today's slide of 438.41 points in the BSE Sensex took the three-day losses close to 1,500 points, cumulatively eroding investors' wealth by over 100 billion dollars (Rs 4,06,000 crore).

The selling pressure continued despite the arrest of outflow by Foreign Institutional Investors. FIIs turned net buyers on Thursday on the bourses with purchase of shares worth Rs 125 crore (Rs 1.25 billion), from being net seller of about Rs 1,800 crore (Rs 18 bilion) a day before.

The trend on FII front for the day's trading was not available till late evening, but the pressure, created by SEBI's proposals, continued unrelented, possibly created by unusually high degree of speculation fueled by rumours.

Market leader RIL, despite announcing impressive second quarter results yesterday, was among the top losers, which collectively pulled down the Sensex to 17,559.98 points.

The S&P CNX Nifty of the National Stock Exchange (NSE) closed sharply lower by 135.70 points or 2.54 per cent to 5,215.30 from previous close of 5,351.00.

Funnily enough, Anil Ambani group had a rare distinction of leading both the pack of losers and gainers on a day when SEBI said that it has started getting feedback from the FIIs on its proposals relating to Offshore Derivative Instruments aimed at checking "anonymous" funds.

While Reliance Communications gained 2.2 per cent on news of getting government nod to offer GSM along with its ongoing CDMA services, Reliance Energy, whose subsidiary Reliance Power is hitting the market with an IPO, shed over 16 per cent and was the biggest loser among Sensex stocks.

The other gainers of the day included Bajaj Auto, which today reported a good set of quarterly results, Tata Steel and ONGC, while the losers included Birla's Hindalco, Sunil Mittal's Bharti Airtel, auto leader Maruti and L&T.
 
Market crash? Good time to invest

The Sensex moves from 18,000 to 19,000 points in just four trading sessions on Monday, nosedives to 17,307 points and closes at 18,715 points Wednesday, down to 17,998 on Thursday, slips further to 17,559 on Friday... a week definitely not for the faint-hearted.

When the Securities Exchange Board of India (Sebi) decided to clamp down on participatory notes, it was a clear signal that it was uncomfortable with the speed at which things were moving in the markets. And it was a view endorsed by the finance ministry as well.

Surprisingly most of the market players are quite comfortable with this correction. As Hemant Rustagi, director, Wiseinvest Advisors admits, "The market badly needed to let off some steam." There are expectations that the market could fall by another 4 to 5 per cent or a little bit more. But this correction will not exactly concern too many ulcers to the market players.

From an investor's point of view, there is that usual confusion. The existing ones would like to know should they book profits now? Adds Shankar Sharma, director, First Global, "Instead of raising cash, this is the time to deploy more cash into this market."

This is because good stocks would be cheaper now. "There is nothing to worry as fundamentally nothing has changed," adds Rustagi. He believes it is a good time for existing players as they can churn their portfolio. He suggests buying in small quantities.

As far as stocks go, experts suggest that this is a ripe time to purchase large-cap stocks. "Any upside to the market will now by driven by large caps," feels Rustagi. Accordingly he says that the ones who have been present in a lot of mid-cap stocks should realign themselves to large-cap stocks. Agrees Sharma, "This is a great time to purchase large-cap stocks and if the prices fall by another 5 to 10 per cent, buy more."

For the mutual fund investor, the advice is very clear. This could be a good time to exit from mid-cap funds to predominantly large-cap funds. Also, if you are not sure about the quality of fund that you are invested in, this could be a good time to shift your money to good quality funds.

Of course, it could be completely dependent on the asset allocation. But ideally, if you have exceeded 30 per cent of your mutual fund portfolio in mid-cap funds, realign the asset allocation towards large-cap funds.

For the new investor, it is a bizarre situation. Should they enter now or wait for further correction? Last week's events are in no way any indicator to what could be happening next. Market analysts say that the Sensex movement from 16,000 points to 19,000 points has been a completely unexpected upside for the Sensex which was completely driven by liquidity released due to an unexpected 50 basis point rate cut by the US Federal Reserve chief Ben Bernanke. As Gaurav Mashruwala, financial planner puts it, "Do not go by last week's events. Wait for some more time before you take a view on both buying or selling." However, he also feels that if you want to enter now, take a call of at least five to seven years and allocate resources depending upon your financial goals.

However, for the ones who have been riding the Sensex boom, Mashruwala thinks that it could be a good time to sell off some holdings to clear outstanding loans. This would reduce the pressure of high interest cost and also free up more money for fresh investment and expenditure as well.

In other words, this correction offers a large number of opportunities for the individual. You could invest if you have missed the earlier rally, you could churn your portfolio to move towards better quality stocks or funds and you could even clear your loans by some profit booking. All this is great news.

Points to ponder

  • Further correction is expected in the next week
  • Ext upside is likely to come from large cap stocks
  • Shift from high mid cap exposure to large cap
  • Generate cash by offloading some holdings and retire high interest loans
 
You must log in or register to reply here.
Back
Top