The Hindu Business Line : Indian bourses among worst hit

New Delhi, Dec. 25 The global financial meltdown may have had its origins in the West, but the Indian bourses are among the worst hit in terms of wipe-out of market capitalisation.

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) lead the list of major stock exchanges that have taken a battering during 2008 (January-November) in the wake of a flight of capital across major markets amid a worsening global credit crunch.

FII flight

According to data compiled by the Paris-based World Federation of Exchanges, the BSE and the NSE saw their market cap tumble around 65 per cent on a year-on-year basis till November 2008 (in dollar terms).

This was mainly on account of foreign institutional investors, the key drivers of the Indian stock market in the past few years, pulling out around $13 billion by end-November 2008, which is over 75 per cent of the estimated $17.2 billion pumped in by these investors during the whole of 2007.

According to analysts, FIIs have been selling their holdings across markets mainly because their lenders, facing a credit crunch in their home markets, have been asking them to bring back the money. The effect of the pullout appears more severe in the Indian context as it is for the first time in over a decade that there’s been a net outflow of FII money from India, even as domestic institutions have desisted from stepping in, in a big way.

The fall in market capitalisation in the case of key bourses in China was less severe in comparison, with the Shanghai Stock Exchange and the Hong Kong Exchange witnessing a dip of around 55 per cent.

The Singapore Exchange also saw a 54 per cent drop in market cap while the Tokyo Stock Exchange was among the better performing Asian bourses, with the fall limited to around 36 per cent.

The major US bourses — the New York Stock Exchange and the Nasdaq — witnessed an over 40 per cent dip in market cap till November. Among developing markets in the Americas, the Mexican Exchange was down 44 per cent while the key Brazilian bourse saw a decline to the tune of around 56 per cent till November 2008, according to the data. The European bourses did not fare much better either, with the London Stock Exchange and the Deutsche Börse also down over 52 per cent.

The Tehran Stock Exchange was the only one that managed to buck the trend in 2008, purely because of its financial isolation.