India bears out in force

A sub-broker makes flower offerings before the statue of a bull outside the Mumbai Stock Exchange ahead of trading in Mumbai. Some investors in the superstitious nation of India had traced to the installation in January of a bronze bull statue at the bourse, as its rear is said to be pointing in an "inauspicious position".Photo: AFP

The bears have come out in force in India with no-one willing to forecast a basement for the country's stock market, which has plunged amid wrenching worries about the global economy.
After being a star performer, soaring an astonishing 622 percent from a low base six years ago to hit 21,000 points in January, the market has shed nearly 60 percent of its value as foreign investors have charged for the exits.
"The bulls are just nowhere," said Alex Mathew, head of research at brokerage Geojit Financial Services.
On Friday, the benchmark 30-share Sensex index tanked 1,070.63 points or 10.96 percent to close at 8,701.07, its lowest in nearly three years, hit by foreign institutional selling, in what newspapers dubbed "Bloody Friday."
Even though just a fraction of the 1.1 billion population own shares, the meltdown has been front-page news amid fears the slide has far wider economic implications.
Global fund flows have been key in spurring the so-called "India story" in which the economy grew by at least nine percent over the past three years with money going into important sectors like infrastructure and telecommunications.
Indian Premier Manmohan Singh said Friday the country will need generous lending from multilateral agencies like the World Bank to keep its economy growing strongly, otherwise "it is bound to experience the pain."
Foreign investors have dumped over 12 billion dollars in shares in the past 10 months, confronted by hefty domestic redemption pressures and India's slowing economy, falling profits and a tumbling rupee.
Their flight is bad news as foreign investors have been the market's bedrock.
And in a double-whammy Friday, the rupee fell past the barrier of 50 rupees to the dollar for the first time, dragged down by Indian asset sales. It has lost over a quarter of its value against the greenback since the year's start.
"The way the markets are going, it makes no sense trying to ride the storm. Just identify stocks for the longer term -- you're bound to get them cheaper later," said R. Balakrishnan, executive director of Centrum Broking.
And as far as calling bottom, no-one is ready to sound the all-clear.
"It can't be said as of now whether the correction is over," said Dipen Shah, a vice-president at Kotak Securities.
Amitabh Chakraborty, president of equities at Religare Securities, said the market now "is factoring in a Sensex level of 6,500."
And some say 6,500 may not be the last stop on the way down for the Sensex, whose misfortunes some investors in the deeply superstitious nation had traced to the installation in January of a bull statue at the Mumbai stock exchange.
Its rear is said to be pointed in an "inauspicious position", leading one broker to joke: "Maybe it's time to change the direction of the bull."
New Delhi furniture company owner G.S. Shiva, who took his first plunge into shares last December when the market was red-hot, reckons he has one-third of his 85,000-rupee (1,700-dollar) mutual fund investment left.
He said it was the last time he'd get his fingers burnt in the market and vowed to keep his money in fixed deposits "like I always have."
Still, some analysts say investor gloom about India's economy may be overdone.
"It's clear all economies around the world are slowing but India appears to have stayed relatively resilient as indicated by still-strong credit growth," said Sherman Chan, economist at Moody's Economy.com.
She expects the economy to record a "less upbeat -- but still stunning amid a sharp global downturn -- growth rate of around seven percent for the current fiscal year."
Investors, meantime, are hoping for a stock market surge after Diwali, or the Festival of Lights, the Hindu equivalent of Christmas, which falls this Tuesday.
Nine of the past 10 years have seen a better stock market performance following Diwali, according to fund manager Fidelity.