BackBroad based selling in equities spares few
Around 460 of 500 BSE 500 stocks under water so far in 2016
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Mumbai: Indian shares have witnessed heavy selling pressure so far this year, with as many as 460 of BSE 500 stocks declining year-to-date, as slowdown in the Chinese economy and tumbling crude oil prices drove investors away from risky assets.
Of these, 42 have eroded more than a quarter of their value since the start of the year, while 298 stocks have shed more than 10% in the period.
Twenty-six of the 30 Sensex stocks are in the red year-to-date, while 44 of 50 Nifty stocks have eroded their value this year.
Top lender State Bank of India and top power equipment maker Bharat Heavy Electricals Ltd (Bhel) led the losses for Sensex with 25.58% and 22.35% decline, respectively.
BSE Consumer Durables is the only sectoral index to post a positive return so far this year. BSE Telecom and BSE Industrials indices were the worst losers, losing 15.95% and 14.33%, respectively.
BSE Sensex and Nifty are down 8.02% and 8.16%, respectively, so far this year. BSE mid-cap and small-cap indices further unperformed with 9.23% and 11.92% decline, respectively, in the same period.
NSE’s India VIX or volatility index, a measure of near-term volatility, rose 56.65% to 21.73 on Tuesday, the highest level since 16 September.
Foreign institutional investors (FIIs) have already pulled out a net of $1.8 billion from Indian equities, after a mere $3.3 billion net investment in 2015, which was the lowest since 2011.
“FIIs sold whatever was realizable, as they had to mitigate losses in other assets classes and other portfolios as well. They sold whatever they could, and these were largely frontline stocks. However, many mid-caps which had outperformed smartly, also came under their hammer," said Deven Choksey, group managing director, KR Choksey Investment Managers Pvt. Ltd.
“Logic could not be applied. They just had to exit, and they sold. Unfortunately, mutual funds also saw a slowdown in inflows, as they haven’t been able to perform as per expectations, and as volatility took a toll on investor sentiment," added Chokey.
Others seem to agree.
“The global EM (emerging market) funds are facing massive redemptions from Middle Eastern sovereign wealth funds. In the first five weeks of this year, we have already seen FIIs selling $1.8 billion of shares. DIIs (domestic institutional investors) have bought $2 .1 billion, which has offset the selling pressure to some extent," said Gautam Trivedi, chief executive of investment banking and institutional equities at Religare Capital Markets Ltd.
Also, on the domestic front, earnings are yet to instill confidence in investors as the demand has not seen a significant pick-up.
Meanwhile, high volatility in the stock market seems to have taken its toll on retail investor confidence in equity mutual funds as well.
Monthly data on inflows into equity mutual funds from the Association of Mutual Funds in India (Amfi) showed that inflows were the lowest in 20 months in January. Net inflows into equity mutual funds, at ₹ 2,914 crore in January, were less than half the average monthly inflow of ₹ 7,550.25 crore in 2015.
“Inflows into equity MFs have started to slow down and if this trend turns into redemptions, the market could see a significant correction even from the current level," said Trivedi of Religare.
“The near term outlook of the market is very weak," added Trivedi.
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