Notwithstanding relief rally caused by European Central Bank chief Mario Draghi about some stimulus in March, equity investors are likely to see more pain in the short-to-medium term since overall risk aversion to new investment continues to stay, hitting the investment sentiment in the bargain, an ASSOCHAM study has said.

According to the ASSOCHAM study, "It would be a mistake to separate India from rest of the world when it comes to the equity investment."

"In well-integrated financial markets today, it would be rarest of rare that the Sensex and Nifty would move a direction different from rest of the Asian markets, European indices and the Dow Jones. In about 90 per cent of cases, they all move in a tandem.

Thus, the capital outflows will not stop merely because we describe ourselves as a bright spot. The real test would be on the way India takes advantage of the fast unfolding global situation which gives a positive bias to our policy makers in terms of a huge windfall through crude oil fall," it noted.

However, shaving off 1-1.5 percentage points of GDP because of nose-diving of exports which have a big multiplier on the job markets, would also weigh on the macro economy, more so through trade deficit.

"Despite the domestic institutional investors (DIIs) holding the ground in the recent few months, it is not going to be great time for the stock investors at least for the next few months," said the study, adding these outflows are also having an impact on the rupee exchange value near about 68 to a dollar.

The Chinese saga is not done as yet and transition for the world's second largest economy from an export-investment-led model to the one based on domestic consumption is not going to be a smooth sailing , leaving bruising impact on several big economies, including the US, Europe, Russia and India.

"However, armed with solid foreign exchange reserves, the rupee depreciation should not be a great cause of worry since bulk of the commodities like oil through which inflation used to trickle in, are trading at new lows. In a way, the rupee depreciation is helping our exporters to ward off their competitive edge to some extent," ASSOCHAM secretary general Mr D.S. Rawat said.

Though India had closed the year 2015 with a loss of about five per cent when the Sensex had closed at 26,117, the expectation was of a better 2016. But the first few weeks of the New Year have been a disaster for the equity investors who are scouting for alternatives.

Going forward, the ASSOCHAM analysts would also prefer to err on the side of caution, rather than going bold. In the mean while, the domestic economy, particularly the next Monsoon and the directional shift in the Budget could make a great difference to the overall sentiment, the paper said, expecting rural India to get more attention from the Modi Government.

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