Post S&P downgrade, 1,129 stocks hit 52-week lows

Our Bureau Mumbai | Updated on March 12, 2018 Published on August 16, 2011


Interest rate hike seen putting pressure on company margins

Receding FII inflows, poor corporate performance and uncertainty on the domestic macro-economic front have sent several stocks to their 52-week lows in the last ten days.

According to data from Bloomberg, around 40 per cent of the BSE stocks hit their 52-week low since the markets crashed on August 5 following the downgrade of the US sovereign rating by S&P. Of the 2,833 stocks listed on the BSE, 1,129 hit year lows in the last 10 days against about 80 that hit year highs.

On Tuesday alone, 272 of the BSE stocks hit their 52-week lows, while 30 companies hit their 52-week highs.

“There is general panic in the markets now. Negative macro-economic factors were present even two months back, but now the situation has aggravated due to the international financial crisis,” said Mr Prithvi Haldea, Chairman & Managing Director, Prime Database. The deciding factor for the market direction lies with the FIIs, complain market analysts. The FIIs who account for 18.5 per cent of India's market capitalisation, have so far pumped in close to $270 billion into the Indian economy.

“Around 57 per cent of the stake of the BSE companies is owned by the promoters and the Indian government, who just buy and hold the securities. The active trading of the securities is carried out by FIIs, thereby controlling the direction of the market,” said Mr Saravana Kumar, Chief Investment Officer, Tata AIG Life Insurance.

The increase in interest rates by the RBI has also put company margins under pressure, said analysts. In the last 16 months, the RBI has increased interest rates by about 425 bps, leading to weaker domestic earnings, they added.

Emerging markets such as India have started looking unattractive to foreign investors. “We are probably very close to the lows of the year; the reason I don't emphatically say this is the buying moment is we still have an inflation problem in the big emerging markets,” said Mr Adrian Mowat, the chief Asia and emerging-market strategist at JPMorgan, in an interview to Bloomberg.

Experts are divided on whether the current market situation is conducive for investments. Some fund managers say that the time may be right for investors to look out for companies with good growth prospects and buy into the shares for long-term gains. However, others feel the market might decline further. “People want to be cautious, so they are sitting on some amount of cash. There is no aggressive deployment happening as of now, as they are waiting for a correction,” said Mr Kumar.

Published on August 16, 2011
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