Celebrations over : Prices fall in Indian Stock market.

BJP government coming to power with a clear majority in New Delhi gave the feeling that political uncertainty is over. The sector which rushed to celebrate the political stability factor was stock market. Stock prices moved to historic levels and the Bombay stock exchange Sensitive Index which is the most accepted share price index crossed the 5000 mark for the first time in its history. Investor perception has changed now and the prices have started moving down faster than the way it moved up. In the last fifteen trading days the Bombay stock exchange Sensitive Index has lost 760 points sending shock waves among investors and the government agencies. The index which was at 5032 on October 11, is at 4272 when the market closed on November 1, Monday.

Good news were in plenty, but investors were uneasy and prices came down during the past two weeks. Confederation Of Indian Industry report on business sentiments said 55 percent of the business houses were optimistic about the performance of the economy in the second half of the year. The figure was 39 percent six months back. The percentage of pessimists came down from 23 to 6 percent. Surveys by a reputed financial news papers came out with improvements in over all profitability of companies across the board. There were clear indication that the transporters agitation against increase in diesel prices is going to end and government came out with suggestions to make the inflow of foreign capital easy.

Other positive items which were ignored by the market were President K R Narayanan talking about 7 to 8 percent growth of the economy and RBI cutting CRR by one percent to 9 percent releasing Rs 7000 crore into the economy. Then we had the US government lifting sanctions on India which had no effect on the stock market. It is interesting to remember that there was a time when we blamed every fall in stock market to the US economic sanctions on India.

However these did little to cheer up the market and what had maximum influence on the prices was a rumor that SEBI has asked brokers to unwind long positions. Then there were rumors about foreign institutions turning heavy sellers and the software companies getting into a rough patch.

Foreign Institutional Investors were projected as the main culprit for the fall in prices. All publications were very vocal about the unloading by FII's and came out with their own interpretations. The most common is that for an FII, annual closing is December and they have to book profits to show attractive performance during the year. Extension of the logic is that they do not want to wait for November or December since the sun is bright today.

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