Post budget FII pullout precipitates fall in the Sensex - Views on News from Equitymaster

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  • Mar 24, 2000 - Post budget FII pullout precipitates fall in the Sensex

Post budget FII pullout precipitates fall in the Sensex

Mar 24, 2000

The BSE Sensex has actually lost over 800 points since it peaked in mid February – a loss of 13.5%. The rise then had been propelled by FII investments. The decline too it seems has been precipitated by a lack of FII interest on most trading days post budget.

In a recent interview with equitymaster.com, Ms Kristin Lindow, Vice President/Senior Credit Officer in the Sovereign Risk Unit at Moody's Investors Service, stated ‘what we did expect and did not see in the new budget was more aggressive spending restraint, a more significant withdrawal of subsidies, the actual elimination of some jobs in the public sector, and concrete proposals for spending cuts that were being hinted at months before the budget…’ (Read the interview).

The disappointment is apparent. However, from a technical point of view the sell off in the markets can in part be attributed to the decline in the NASDAQ (remember that it was the technology sector in India that was leading the rally), which corrected over 9%. This affected the domestic bourses in two ways. First, the sentiment regarding valuations of technology stocks altered during the period. And secondly, foreign institutions turned sellers to book profits in Indian markets (they had lost on the NASDAQ).

The last two months have witnessed a surge in FII inflows followed by a reversal in the trend. Net FII investments since 1st of February have now crossed Rs 34 bn. However, during February alone net investment of Rs 28 bn, which then declined to over Rs 6 bn in March. This has coincided (and in all probability contributed atleast in part) to the swing in the markets.

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