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ShareMumbai: The stock market's disappointment with Pranab's do-nothing Budget has not only cut short its post-election honeymoon, but it's also threatening to end its four-month-old marriage with bulls.
Despite yet another street-beating quarterly numbers by Infosys Technologies and encouraging IIP numbers, the Sensex ended the worst week in 2009 with a vertical crash in the last half-hour of trade.
Budget bruises being split into painful wounds with reversing capital flows, worsening global economic environment and collapsing technical dams indicate a further downhill course for the market, feel experts.
At Friday's low of 13418, the Sensex dipped below its opening on that euphoric post-election Monday. This means a number of investors who got sucked into buying at those levels are deep in red now.
"A number of retail investors who had initiated longs around 4400 levels are hit badly. They must have a cost of carry to meet. They have to book losses or see their cash positions also get liquidated to meet margin requirements," says a senior broker.
Nifty closed just above the 4000-mark after losing 77 points. Breaching the mark would create a downslide, say experts.
"When long positions get into weak hands, and the market begins to fall, there is no option but to book losses," says Sandeep Singal, head of institutional derivatives, Emkay Global.
He adds: "There was heavy concentration of put options around the 4000-levels. The open interest was around Rs 1,800 crore. So, once the market starts trading below 4000, further fall could be severe. Market looks weak at the moment. Typically, once it starts falling, it's difficult to judge how far it can go."
Rajiv Varma, senior derivatives analyst, India Infoline, expects the market to be negative on Monday also.
"Friday's last hour move was very frightening. I am still negative. Put writing is seen at 3700-3800 levels, while the call writing is happening around 4300.I expect to see 3900 on the Nifty. But IVs on out of the money Puts were on slightly higher side. So, the downside could be limited."
Varma says Friday's slide was caused by Basket selling by FIIs in the cash segment after 3 p m on Friday created a slide. According to provisional figures, FIIs net sold equities worth Rs 903 crore.
For the past two sessions, the foreign institutions have been sellers in both cash and index futures. The numbers on the Sebi do not reflect this reversal as it includes huge inflows through the QIP route.
According to Sebi figures, FII flows for the month stand in excess of Rs 4,065 crore. Even after adjusting Friday's provisional figures, it is well in the positive. However, the indications of heavy outflow is visible in numbers elsewhere.
The currency has been on a losing spree following the flight of dollars. The rupee closed down 2.3% for the week at 49.05 per dollar.
According to EPFR Global, the company that tracks global fund flows, emerging market equity funds posted outflows for the second time in three weeks on growing doubts the global economy will recover soon.
Investors withdrew $365 million from funds investing in Asia excluding Japan in the week ended July 8, the research firm said in a statement on Thursday.
This could affect inflows into India as Asia-dedicated funds allocate significant sums into Indian equities.
However, India stock funds lured $52 million (RS 250 crore) following the release of the government's budget, it added.
The MSCI Emerging Markets Index is down 3.2% this week, extending a retreat from its June 1 high to 7.3%, as the US job market worsened and Japanese machinery orders unexpectedly dropped.
Benchmark indices in Russia and India are among those that have entered a so-called correction after slumping more than 10% from their highs this year.
"Fresh doubts about the US appetite for emerging markets exports and global demand for raw materials prompted investors to pull some money off the table in early July," EPFR said in a statement.
Emerging-market funds attracted a record $26.5 billion last quarter as China's "aggressive" measures spurred confidence in developing economies, EPFR said on July 2. The MSCI Emerging Markets Index soared 34 percent during the three months ended
June 30, its best performance since the measure was created.
China equity funds also lost $424 million in the week ended July 8, while Brazil outflows totaled $244 million, the research company also said. Funds investing in Russian stocks attracted "modest sums."
Overall, investors withdrew $1.87 billion from equities and added $2.95 billion to fixed income, according to Cambridge, Massachusetts-based EPFR. The research company tracks funds with $10 trillion in assets.
"With vacations looming and the second-quarter earnings season starting, both market and fund flow data painted a picture of investors heading to the sidelines," EPFR said.
