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Sentiment weak despite vote on account

NetScribes/Rajiv Banerjee & Pallavi Rao

The vote on account has been passed by Parliament, but it has failed to enthuse the stock markets as the downfall continues. The impending payment crisis on the Calcutta Stock Exchange and the political instability continues to cast a long shadow on the market.

The Sensex closed at 3672.40 points on Tuesday, down 1.35 per cent from the previous close of 3722.49.

Analysts and fund managers said that the approval of the vote on account in Parliament would improve sentiment only to a certain extent. The primary issue before the market is the payment crisis on the CSE. If the payment crisis continues, the fear is that the Sensex might touch 3200 levels as the fear psychosis further deepens.

Deepak Agrawal, associate vice president, Kotak Securities said that the sentiment in the market is at its nadir and even positive news like the approval of vote on account has failed to make an impact. "The market will continue to be negative unless the payment crisis is addressed. The fear amongst the investors is that the payment crisis might spill over on the Bombay Stock Exchange," said Agrawal.

"The uncertainty of the Budget is over and that will help improve the sentiment. But for the market sentiments to really improve larger issues like the payment crisis have to be addressed," said an analyst at KR Choksey Shares and Securities Pvt Ltd.

Despite the bearish trends, some of the foreign funds like Government of Singapore and domestic mutual funds like Templeton (India) AMC, Prudential-ICICI and Alliance Mutual Fund have been strong buyers at the Indian markets over the past few days.

They have bought selectively into sectors like fast moving consumer goods, auto and infotech.

Ayaz Motilal, an equity fund manager at Birla Mutual Fund said that the positives accruing out of the policy announcements in the Budget would have been lost if the Budget was stalled at the Parliament.

"For sectors like FMCG, auto and pharma, the Union Budget has given a lot of incentives. The reduction in the corporate tax, the removal of excise duty on processed foods and the imposition of flat rate of excise for automobiles augurs well for the respective sectors," a fund manager from SBI Mutual Fund said.

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