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Why have the Indian stock markets lost momentum?

Why have the Indian stock markets lost momentum?
Global markets rallied this week, while the Indian Sensex fell for the seventh straight day on Friday. The one simple reason why Indian markets are falling is the huge selling pressure from domestic institutions. In fact, through the last week they have been net sellers, while foreign funds have been net buyers.

Domestic funds have been selling in the markets to enable them to subscribe to the government's various divestment programmes. In fact, the NTPC OFS by the government raised around Rs 11,500 which was mostly subscribed by domestic funds.

The government's various other offerings are likely to suck out liquidity from the system and hence could see the markets falling further in the coming week.

Another reason for the fall in the indices is the huge shorting by punters and selling by investors who were stuck since 2008, after the collapse of Lehman Brothers.

Stocks like DLF, HDIL, Jaiprakash Associates and others have offered investors the chance to exit after accumulating these stocks at very high levels. Despite the indices falling only 3 per cent from their earlier high levels the broad market has dropped sharply, particularly the public sector banks, which have been hammered out of shape.

PSU banking stocks like Indian Overseas Bank, United Bank, Bank of India and Canara Bank have tumbled following a poor set of numbers from several public sector banking names.

There is tremendous weakness in the real estate stocks as well and it is best to stay away from stocks from the sector.

Markets are likely to trade in a range at least for the next couple of weeks, before the next big trigger - the Union Budget.

Meanwhile, global markets are looking strong, though rising prices of crude could put a spoke in the wheel of equity markets rally. Crude is trading a shade below the $119 levels which is not good news for India.

Read more about: markets
Story first published: Saturday, February 9, 2013, 10:17 [IST]
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