Indices Post Worst July Show Since 2002

Indian stock indices recorded their steepest fall for the month of July in 17 years even as the benchmarks ended marginally higher on the last trading day of the month. Analysts do not rule out a brief rebound in early August as the market look oversold but this strength could be short-lived.

The Nifty slipped below the 11,000 mark in Wednesday’s volatile trading session before ending up 32.60 points, or 0.3%, at 11,118. The Sensex ended 83.88 points, or 0.2%, higher at 37,481.12.

A rate cut by the RBI in its monetary policy review on August 7 is also seen providing relief to the market.

However, the bounce back is likely to be short-lived.

The Nifty fell 5.7% in July this year, the steepest fall witnessed in this particular month since July 2002 when the index had fallen 9.2%. More than 84% of the BSE MidCap index constituents recorded a fall in July.

Euphoria that surrounded the markets after the return of the NDA-led coalition at the centre in May has been replaced by disappointment because of lack of stimulus in the budget to support consumption demand. The higher tax surcharge proposed for the super-rich in the budget has been the key reason for the flight of FPIs from the Indian equity market in July. FPIs sold shares worth ₹13,300 crore in July.

Rahul Arora, CEO-institutional equities at Nirmal Bang, said the tax surcharge on the rich and certain investment vehicles have created uncertainty among the market participants.

The ongoing credit crisis in the NBFC sector and cautious commentary from India Inc about the effects of economic slowdown have also soured sentiment.

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