Run up for Lok Sabha polls begins: Investors still downbeat
Something that was expected by the most number of investment experts – run up to the parliamentary polls can bring back confidence of the investors back into Indian markets, seems going bust as the elections near. The probability of a new government arriving on the scene and clearing the financial mess created by the existing one is now getting bleak for all the unclear reasons. Maybe one is the leeway of no major political party turning up with complete majority; even the Bhartiya Janata Party (BJP) led National Development Alliance (NDA).
It was a conviction that a new pro-market government (read NDA), which would not mind much before clearing the long existing roadblocks from the pathways of development and hence, the equity market was flooded with money in the last few months, even though fundamentals remained unaffected.
But, now when it’s making sense to most of the stock market analysts that the game ahead is not as smooth as appeared at the start, and a hung parliament looking to be the most probable result post elections, any likelihood of such a government appearing to vanguard, that can push below five per cent growth rate back to nine or double digits, can be asking for too much now.
Just peeping into the records we learn that over the span of last six years, round about $90 billion were infused in the Indian equities by the foreign institutional investors (FIIs). However, what’s most astounding is that, despite sizable amount of investment flowing into stocks, benchmark indices are still sitting unmoved to the levels witnessed in the year 2008.
The rupee has fallen by 19 per cent since January 2013 to January 2014, and hence the dollar returns of Sensex stand eroded by a considerable amount. There is not much to anticipate in terms of risk capital making flight in the Indian markets, when growth rate has fallen to below five per cent.
Market analysts are skeptical about the future, mainly considering the outflows from emerging market funds regularly since the year 2013. It’s in total of about $13 billion since the commencement of the year.
Thailand and Indonesia have shared most of these outflows. Although, India hasn’t felt the brunt to such level yet and observed inflows of $ 407 million, since January this year, domestic markets can feel the pinch any time soon.
Going by the BSE Dollex-30 index, the dollar returns of the Sensex have reduced by 34.4 per cent and the index has returned only three per cent since 2008.
We want Nifty to breach 7,000 points at the earliest, but high level of inflation and RBI’s indication of keeping monetary policy tight under control for some more time may not let the dream come true. Still, keep the fingers crossed!