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BSE market cap down Rs 691.18 billion in April

The capital markets all over the country today crashed with the Centre's decision to recommend dissolution of the 12th Lok Sabha, triggerring off nervous offloading of stocks by investors.

With the Patents Bill yet to be passed by the Rajya Sabha and the fate of the Insurance Regulatory Bill hanging in balance, investors are bound to resort to a selling spree at least in the short run, market analysts said.

If the elections are held sometime in September-October, investors, including foreign institutional investors, might discount the political uncertainty. However, if they are held in May-June, they would rather wait and watch.

Besides, corporates are expected to announce good results in the coming months, which may also come to the aid of the capital markets if elections are not held very soon, Vinod Jain, president of the Association of NSE Members of India said.

In fact, major overseas stock exchanges have already plateaued with the Dow Jones crossing 10,000 points, which may lead to greater investment by FIIs in the Indian capital market, M M Chugh, director in the board of the Delhi Stock Exchange said.

However, a few analysts said FIIs will more or less adopt a wait-and-watch policy.

The Associated Chambers of Commerce and Industry of India or Assocham said despite the feel-good factor generated by the Budget, the immediate signals point to bleak capital market prospects.

The market capitalisation over the past few days came down by whopping Rs 500 billion, Delhi Stock Exchange sources said.

The country's premier index, the Sensex, today plummeted by 161.94 points or 4.8 per cent to 3244.65. Major blue chip shares, with almost all the leading infotech shares, attracted the circuit breaker at the lower level.

This was a major fall for the second time during last ten days. Before, the Sensex plunged by 246 points at 3326.98 on April 17, when the A B Vajpayee government lost confidence motion by one vote in the Lok Sabha.

The DSE index (base 1983) was down by 37.48 points at 713.73. Earlier, when the Vajpayee-led government lost trust vote, it plunged by 55.78 points to 738.57.

Meanwhile, there was some anxiety at the foreign exchange market when the rupee decline by eleven paise to Rs 43.00 to a US $. However, fresh corporate dollar off-loading at the higher level stabilised the market with rupee-dollar rate closing down by two paise at 42.83/85.

Financial experts have charged political parties for pushing the markets in a phase of uncertainty with the dissolution of 12th Lok Sabha today.

The Bombay Stock Exchange director Bhagirath Merchant said the mid-term polls will push the country three years backwards. He felt the stockmarket is likely to witness a downward trend.

Merchant said that the market capitalisation on the BSE was eroded by Rs 691.18 billion in the current month, following massive decline in share prices due to political drama in Delhi. He held the political parties equally responsible for 'vanishing' companies.

Vasudeo Joshi, assistant director at the Jardine Fleming Asset Management Company said the dissolution of 12th Lok Sabha affected the market sentiments and now the delay in election may likely to cause severe damage to the stock market.

He said that if election are held in June, players can hold their positions, but they cannot if the wait gets prolonged for six months. The Asian markets are currently doing well, and the present political crisis in India is likely to attract redemption pressure from foreign institutional investors.

The 30-share BSE Sensex started at 3750.22 points on April 1 and after witnessing volatile movements in reaction to the political developments, it ended at 3245.27 points today, showing a loss of 504.95 points in 16 trading sessions conducted at the BSE betweek April 1 and 26.

A Madhavan, analyst at the ICICI Securities Limited said in view of stable currency markets, the money market will remain unaffected for quite some time, but the uncertain political situation would certainly affect the overall growth of economy.

The economy is likely to witness a slowdown for at least the next six months, he said.

Jignesh Shah, assistant vice president at Triumph Financial Company Limited, said that mid-term poll was not expected by the marketmen.

The Indian rupee has lost about 40 paise to the US $ in April.

K N Dey, vice president, Mecklai and Mecklai Financial Company Limited, said that the rupee is unlikely to react to the dissolution of the Lok Sabha.

He said that the RBI had brought in several restrictions on the market participants last year when the market witnessed excess volatility. However, the restrictions continue even now, making it difficult for the Indian rupee to move freely. The rupee should be allowed to move on its own, he said.

UNI

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