Reference Auto

Foreign institutional investors or FIIs have scaled down their presence in the country (offloading about Rs 6,960.10 crore worth of stocks this year), and this, along with the scam in the telecom sector, is taking a big toll on the bourses with the Sensex witnessing 280 points fall last week to 17,728.61 points.

The NSE 50-share Nifty also tanked 85.75 points (1.59 per cent), to close at 5,310.00 last week and shed 386.50 points in the last three weeks.

The markets have slid for the third week in a row, and with the ambit of the telecom scam widening (with the arrest of DB Realty’s founder this time), the bourses are likely to remain subdued for a while.

Moreover, the Telecom Regulatory Authority’s new recommendation on 2G spectrum pricing is also creating a great deal of confusion.

Almost every sector in the market remains subdued and metal, real estate, consumer durables along with capital goods were the worst performers.

The Egypt crisis, which is heading towards stability after Hosni Mubarak’s resignation, could impact the markets for a while as oil from the Middle East could become dearer.

Moreover, a possible slide in the earnings of India Inc and the untamed inflation could also act as an impediment for the stock markets. Food inflation fell to a seven-week low of 13.07 per cent in the week ended January 29 against 18 per cent in December.

The IIP, which measures industrial activity, for December plunged to 1.6 per cent compared with 2.7 per cent in the previous month. Manufacturing activity slid to 1 per cent from 19 per cent in the same period of the previous month.

The three-week fall in the bourses could snap this week owing to some stability in Egypt and the impending Union Budget where some positive news on the GST front could spur sentiment.

On the positive side is the growth projection, which could be a healthy 8.6 per cent for the current financial year.

Moreover, the government is cornered on two fronts – inflation and 2G telecom scam – and will be desperately looking for a face saver which could come in the form of a people-friendly Budget.

In case this happens, the markets could see a surge in March, and for speculators (short-term investors), this could be the right time to pick stocks.

However, avoiding telecom stocks would be prudent as the 2G scam could take a toll on the shares of companies, which even FIIs are staying away from.