The Hindu Business Line : Market jitters persist

Mumbai, Oct. 9 Worried investors in Indian equity markets hoping for a turn of sentiment in the global markets following coordinated rescue efforts by governments across the globe had little to cheer them on Thursday.

They were looking for some stability back home when the exchanges open for trading on Friday.

After Wednesday’s carnage, the Asian markets did show signs of recovery with the Hong Kong and Singapore indices registering a gain of over three per cent while the Japanese index Nikkei closed 0.5 per cent lower.

The major European markets also traded in the green for most part of the day, in response to rate cuts and good show by the IT major IBM.

The US markets also opened higher; however, very soon Dow fell sharply with Nasdaq too following suit after offering some resistance. This sent nervousness across the Atlantic and the European markets retraced their gains. By mid-day, the US indices had regained lost ground considerably, though still in the red.

Whether the market gains or loses, investors will have to live with volatility for some time to come, it appears.

Resilience

Despite the steep fall in the Indian indices, one can see an element of resilience on the part of retail investors, who have not panicked, unlike in past market crashes, said Mr C.J. George, Managing Director, Geojit Financial Services Ltd. “This is a positive sign. The current global financial turmoil is not of stock market origin; it is the fallout of the global credit market crisis.”

In the short term, the movement in Indian markets will depend mainly on global cues and FII activity, he added

The selling by foreign institutional investors was the major factor behind the 955-points fall of the Sensex on Wednesday, their net sales of equity amounting to Rs 1,055 crore. The Sensex was pulled up from its intra-day low of 10,740 as domestic financial institutions later stepped in, helping the market close above 11,000.

On the same day, central banks across the globe, led by US Federal Reserve and European Central Bank, cut interest rates by half a percentage point. The Chinese central bank too announced cuts in key interest rates.

On Thursday, the central banks of South Korea, Hong Kong and Taiwan followed suit, cutting interest rates. Bank of Japan announced an infusion of ¥4 trillion, equivalent to approximately $40 billion, in the money market.

Another stock market analyst said domestic institutions do not want to be aggressive on buying as this would further smoothen the exit route for FIIs, looking to seize the slightest opportunity to liquidate their positions.