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BW Businessworld

Equally Battered

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May has been bad for equities worldwide with markets losing ground on fears of Greece exiting the European Union. The European sovereign crisis saw investors moving away from equities to safer havens, especially the US dollar, which posted its biggest monthly gain since 2011. This dragged down equity markets with the MSCI World Index and the MSCI Emerging Market Index losing 9 and 12 per cent, respectively.

In India, too, investors stayed away from equities. Hrishikesh Parandekar, CEO of Karvy Private Wealth, and one of the experts of the BW Expert Index, says, "The fear of losing money in (Indian) equity saw investors put money into high-yielding debt paper and in real estate."

Though the Sensex fell nearly 6.5 per cent, it was on the back of low volumes. The daily average turnover for the BSE in May was about Rs 1,900 crore, compared with Rs 2,115 crore in April 2012. FIIs continued to stay away, but were not major sellers — they sold Indian equities worth $57 million, compared to $205 million in April.

Though the BW Expert and the BW Dart Board Index lost ground (5 per cent and 4 per cent, respectively), they managed to beat the Nifty 50 (down 6 per cent). In US dollar terms, the fall has been more severe — the BW Expert Index, BW Dart Board Index and Nifty 50 lost 11, 10 and 12 per cent, respectively.

In the BW Expert Index, only three stocks gained — Wipro (1.1 per cent), EID Parry (0.6 per cent) and Eicher Motors (0.4 per cent). The biggest loser was IRB Infrastructure Developers, which lost 34.5 per cent in a month.

The market's free fall also saw stock picks of all the eight experts lose. (See the expert picksand returns on www.businessworld.in.)

The rise in Hindustan Unilever (2 per cent), Apollo Hospitals (5.78 per cent) and Patni Computers (2 per cent) helped the BW Dart Board Index outperform the BWExpert and Nifty 50.

The only silver lining has been commodity prices, particularly crude oil, which fell 13 per cent from its high nearing $100 per barrel. Further correction will be good news for India's double-digit deficit. Says P.V.K. Mohan, head of equities at Principal Mutual Fund: "Though the global crisis has been a cause of concern, policy paralysis in India will restrict the upward movement in the market. A clear trend will emerge only by end-June and early-July after the President's election and a clear picture on monsoon."

Also, by the last week of June, the fate of Greece and the euro would be known. Parandekar says, "Most of the bad news is factored in the price. We are near the bottom, though one cannot say with certainty that the market will not go down further. Some overshooting is possible but it is not going to be sharp."

(This story was published in Businessworld Issue Dated 11-06-2012)