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Indian stock market at bear zone; Asian stocks gain

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January 24
9:12 PM 2016

Indian economy is forecast to grow 7.4 percent in 2016. However, the Indian stock markets are suffering from the impact of being relied on foreign institutional investors (FIis). The Indian stocks are poised to enter bear phase any moment after the fall in Shanghai and Tokyo markets. From November onwards, foreign investors started offloading in Indian stocks. 

The S&P BSE Sensex, benchmark for the Indian stock market, may enter bear territory following the collapse in China and Japanese stock markets. These markets suffered losses of over 17 percent since the peak levels recorded in year ago. Cash-strapped foreign investors started selling in Indian stocks.

India is growing faster than China and Brazil. The fast growing Indian economy may a hope of ray among emerging markets, but the domestic stock markets are reeling under uncertainty in the wake of global selloff. Foreign investors own $285 billion worth shares in Indian markets. Now, the domestic markets suffer from high reliance on foreign investors, as reported by The Wall Street Journal (WSJ).

The rebound in oil prices pushed Asian stocks upwards taking a cue from the US and Europe markets. The indications of more monetary easing from European Central Bank (ECB) are also strengthening investors' confidence. Japan's benchmark Nikkei-225 rose 5.9 percent and closed at 16,958.53 points. Commodity shares were also moving up. Australia's S&P ASX-200 index was 1.1 percent up at 4,916 points. 

Nikkei touched 15-month low a day before. Shanghai composite index also rose over one percent and Hang Seng index gained 2.9 percent. The recovery in oil prices brought fresh buying support to the Asian stocks. Brent crude rose 98 cents to $30.23 a barrel. The US crude was up 85 cents to $30.38 per barrel, according to BBC.

ICICI Prudential Asset Management Co says that domestic institutional investors (DIIs) hold only $60 billion worth of shares. The Middle East-based sovereign wealth funds, which depend upon on oil revenues, sold heavily. Foreign investors started selling in Indian markets since November 2015. 

Global investors parked their funds to the tune of $4.7 billion in Indian stocks in 2015. However, foreign investors withdrew $3 billion and this kept more pressure on Indian stock markets. As part of the strategy of pulling back from emerging markets, global investors started offloading in Indian stocks. Foreign investors offloaded $1billion worth shares in this month so far. BSE Sensex, the Indian stock market's barometer, is expected to be 24,900 points by end of the first quarter of 2016. 

Sensex is predicted to trade at 23,000 in 12 months time. BSE Sensex was closed at 24,435.66 points on 22 January 2015. Sensex is forecast to be at 24,300 points by second quarter end, 23,600 points by end of third quarter and 23,000 points by the end of fourth quarter, as predicted by Trading Economics. It's also expected that Sensex would be at 30,700 points by 2020.

Sankaran Naren, chief investment officer at ICICI Prudential Asset Management, said: "They are not selling because India is a bad market, but they need money." ICICI Prudential manages $25 billion in Indian stocks and bonds. The slump in Chinese commodity market is also impacting India. The sluggish manufacturing industry in China is easing down demand for steel and copper. 

This is also impacting Indian mining companies' revenues. Some market analysts predict that the world is slipping into next round of recession and India is not immune to it. The market fall of 20 percent or more is considered to be the bear phase. Some analysts feel that the so-called Modi wage that took the markets up 30 percent is over.

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