Choppiness is still on
From the autumnal gloom of in last August to the jitters early this year the world markets have moved to the ides of March. These are taking as much a toll of the Indian equity market as the global bull run of the earlier three years had hustled it up. In the markets worldwide, whether a market is emerged or emerging, most of their equity indices (see chart below) are reflecting the continued worries on recession in the US and the growing impact of sub-prime mortgage crisis on global equity fund managers' need to book profits.
In the Indian market, such an impact is continuing to manifest itself in the net sell-off by the foreign institutional investors (FIIs). "The FII factor is also influenced by the Yen's continued appreciation against the dollar due to the 'Yen carry trade' effect," says Dipen Shah, vice president-private client group research at Kotak Securities. "Due to several losses suffered by the domestic retail investors in last few months there is an absence of their participation too."
The professional wizards in the hedge funds are also feeling the heat. The first two months of this year saw Eurekahedge (EH) hedge fund indices take a beating. On a year-to-date basis, at the end of February, the EH Asian Index was down 3.5 per cent, EH Emerging Markets Index was down 3.2 per cent and EH European Index was down by two per cent. Indian hedge funds were reported to have the worst fall in January giving negative return of 11.5 per cent.
The tides are likely to remain choppy. "We expect the uncertainties to continue in March especially after more Fed data on housing revealed further problems," says Shah.
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