Industrial sector continues to witness slowdown in growth
The debt crisis in Europe, slowdown in the U.S. economy and
domestic concerns such as high inflation, poor credit offtake, depreciation of
the rupee against the dollar and other major currencies, had a disastrous
impact on the Indian stock markets in the just concluded calendar year 2011.
The Sensex (benchmark index of the Bombay Stock Exchange)
ended the year losing 5054.17 points (24.6 per cent) in one year to close at
15454.17 on December 30, 2011. The Nifty of the National Stock Exchange lost 1510.20
points (23.7 per cent) to close at 4624.30. Though investors hope that the
market would revive in the beginning of 2012, brokers expect the downtrend to
continue for some more time with a further fall in the key indices. They are
concerned over the revival of the Indian economy in the near future
Foreign institutional investors (FIIs) turned heavy sellers
in equities in 2011 with their net investment turning negative at Rs. 2,714.20
crore against the net inflow of Rs. 1,33,260 crore in 2010. On the debt side,
net investment was Rs. 42,067 crore against Rs. 46,408 crore. In dollar terms,
the net investment in both equity and debt stood at $8,297 million against
$39,474 million.
The heavy offloading by FIIs resulted in 12 of the 13
sectoral indices closing in the red, with some of them hitting 52-week lows
during 2011. Only the FMCG (fast-moving consumer goods) sector finished the
year with a moderate gain of 8 per cent. Realty stocks suffered the most with
the CNX Realty index of the National Stock Exchange dropping by 49 per cent.
The infrastructure index, CNX Infra, lost 38 per cent, bank Nifty 32 per cent
and CNX IT 18 per cent.
According to Gagan Randev, CEO, Religare Securities, the
pullout of funds by FIIs compared with record inflows in the previous year,
rising current account deficit and sharp depreciation of the rupee — all teamed
up to push investors on the back foot, resulting in losses in 2011. FMCG was
the best performer and realty and metal indices were the worst hit, he said.
The FMCG sector could do well due to a rise in demand for
the products in the rural markets.
The banking sector suffered due to reduced credit offtake
impacting their core operations. Only the treasury and other non-banking
operations, such as distribution of mutual fund and insurance products, helped
some banks to report a better performance.
Domestic institutions
Domestic institutions are still cautious and mutual funds
see redemption pressure especially from banks. With the Reserve Bank of India insisting
banks to cap their investments in liquid funds at 10 per cent of their net
worth, mutual funds witnessed large-scale redemption in the last quarter of the
year.
It is felt that markets will recover from April with a
pick-up in credit offtake and a downtrend in global crude oil prices.
Source: http://www.thehindu.com/business/Economy/article2761154.ece
Posts
No comments:
Post a Comment