Indian stock market turns wobbly as polls loom
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Indian stock market turns wobbly as polls loom

Thursday, 22 January 2004, 08:00 Hrs
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NEW DELHI: India's stock market, one of the best performers in Asia, has turned sluggish after touching an all-time high last week with fund operators tightening their purse strings ahead of early national elections.

Analysts say the market, which has lost nearly eight percent from its life intra-day high of 6,249.60 points touched earlier this month, is likely to trade within a close range in the days ahead on "pre-election jitters".

The sharp fall in the market Tuesday and Wednesday has already shaved off 947.87 billion from the market capitalisation of the benchmark Bombay Stock Exchange. The spurt of selling has hit almost all sectors.

"The overseas as well as domestic bulk investor hesitate to pour money into the trading ring when elections lurk in the horizon," said a senior equity analyst with a New Delhi-based brokerage firm.

"Elections basically crate a sense of uncertainty and fund managers don't like any kind of uncertainty. They find it a perfect time to book profit after sharp rise in the last few sessions," the analyst told IANS.

The poll jitters have started to cast a shadow over the market, with overseas fund operators, the backbone of India's liquidity starved capital market, adopting a cautious approach after investing heavily in recent months.

Indian parliamentary elections are likely to be held by April, months ahead of the schedule.

The foreign investors had picked up equities worth $500 million in the current month so far, as compared to a whopping $1.4 billion in December last year. The overseas fund inflow in this month has fallen below market expectations.

The Bombay Stock Exchange index soared 73 percent in 2003 over the previous year, making it one of the best performing markets in the Asian region, mainly on the back of a record $6.7 billion foreign institutional investments.

Foreign funds had greatly enhanced their allocations for the Indian market since the middle of the last year on hopes of a sharp economic rebound in Asia's third largest economy.

India is set to become one of the fastest-growing economies this year, perhaps surpassed only by China. India's October-December gross domestic product increased 8.4 percent from its previous year's level.

Large-scale buying by overseas as well as local investors, fuelled by hopes of impressive quarterly financial performance by marquee Indian companies, propelled Indian market to an all time high on January 14.

The market barometer also breached its all time intra-day high of 6,150.69 points touched on February 14, 2000.

"The last couple months' foreign fund inflows had raised expectation for the first few months of the current year, and therefore, huge positions were built up," said the analyst.

"So, when there were five or six days of a slowdown, everybody started unwinding their positions fearing the sluggish pattern would continue till the general elections are over."

A section of analysts, however, feel that the market was overheated and that a mid-term technical correction was long overdue.

"It's a standard technical pattern at play. I don't think anything has changed fundamentally in the last few days," said Dhirendra Kumar, managing director of capital market research firm Value Research.

"The market is just facing resistance at higher levels. General elections are not a big issue. It was in the air for quite some time and investors had already factored in the prospects of early elections," added Kumar.

Neeraj Deewan, an analyst with Quantum Securities, says that the market may see some stability after another 40-50 points.

"At this stage, investors are a bit worried over the sustained downturn after massive gains just a week back. But from long-term investment point of view, there is not much concern."



Source: IANS
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