BSE Sensex today hit lowest levels since the finance minister announced his reform measures on the 14th September 2012. What exactly happened between September 2012 and now?
Today the Bombay Stock Exchange’s (BSE) 30-share Sensex hit a low of 18173. On 14 September 2012 when finance minister P Chidambaram announced his big bang reforms, the Sensex stood at 18,464. The reform measures included reduction in diesel subsidies, allowing foreign direct investment (FDI). These announcements were welcomed by many, including foreign institutional investors (FIIs). Believing the finance minister, they pumped in a lot of money into the markets taking it to new high in January 2013. However, since then markets have tumbled to below 14 September 2012 level, wiping out all the gains accrued since then.
Take a look at the chart below:
The BSE Sensex started at 18,464 on 14 September 2012, when P Chidambaram announced a slew of so- called economic reforms. Some of these measures include 51% foreign direct investment (FDI) in multi-brand retail, hiking diesel prices and putting a cap on the supply of subsidised LPG cylinders to households. The market obviously reacted very positively in the following months after announcement and soon breached 20,000. Some of the biggest investors were foreign institutional investors (FIIs).
Eventually, on 25 January 2013, the market reached its peak at 20,103. It had moved up 8.8% within just over four months. However, over next two and half months the markets wiped off those gains completely. The second half of the graph clearly shows this.
Just when Chidambaram introduced the slew of economic reforms, the most excited were foreign institution investors (FIIs). They played a key role in pushing the markets higher and higher by pumping in cheap foreign money. FIIs poured as much as $8.4 billion into Indian equities in the third quarter and much of it into banking and financial sectors, hoping that the reforms and low interest rates (which RBI would soon cut) would be key catalysts. Analysts from foreign investment banks were pumped up as well. For instance, leading brokerage firm Goldman Sachs pegged Indian growth to touch 6.5% in 2013 and further to 7.2% in 2014. Many foreign investors were expecting India’s economy to pick up on the back of such economic reforms.
However, at the same time, domestic institution investors (DIIs) were moving in the opposite direction. They were bearish and selling equities. Several times, they turned out to be correct, according to an analysis undertaken by Moneylife. In fact, DIIs were betting very selectively, selling as much as $3.5 billion worth of equities during the December 2012 quarter. It is not surprising because DIIs know more about Indian economy (and reform measures) than foreigners.
The BSE Sensex peaked in January in the hope that the RBI will cut rates aggressively. As inflation moderated, the Reserve Bank of India (RBI) cut rates a bit. Meanwhile, prior to the Budget, the finance minister and his entourage went on a global tour, trying to sell the India story to investors. He went to Hong Kong and Singapore to assure and pressed for the case of investing in India when he told them that India’s fiscal deficit would be brought down to 3% in 2016-17. However, the Budget proved to be a dampener and many, including FIIs and DIIs, were left disappointed. The markets crashed by more than 1.50% on the day of the budget. We had written in detail about this in the Fortnightly Column, ‘An affair to forget’.
Foreign brokers and investors were losing patience and they realized that the budget was aimed at the vast electorate instead of economic reforms. There was no mention of big reforms in the Budget as initiated earlier in September 2012. We had written a piece on this. Soon, investment banks were trimming forecasts. Nomura cut India’s GDP forecast to 5.6% , while Moody’s has stated that if India grows over 7% without economic reforms, inflation will be a big concern.
“Some government policymakers, most notably RBI governor D Subbarao, have begun pushing for a return to double-digit growth. This is wildly optimistic and, without significant structural reform, a dangerous view to take,” Moody’s Analytics, an arm of ratings agency Moody’s, said.
Finally, once again, the Indian reality of more talk and less action, policy paralysis and deeply vested interests, asserted themselves. The market merely reflects this. (read An India Reality) . We are not surprised. We have pointed several times ever since the market started getting euphoric beyond a Sensex level of 19,500. (Read Reality strikes and High Risk Low Reward ) This should be an object lesson to investors who make investments decisions based on a government that cannot put through anything other than cosmetic changes.
The Supreme Court had on 21st March upheld Sanjay Dutt’s conviction under Arms Act and sentenced him to five years in jail of which he has already served 18 months
Bollywood actor Sanjay Dutt, ordered by the Supreme Court to complete his five years sentence for complicity in the 1993 Mumbai blasts, is exploring the option of filing a review petition against the judgement, sources close to him said today.
The Supreme Court had on 21st March upheld Sanjay Dutt’s conviction under Arms Act and sentenced him to five years in jail of which he has already served 18 months.
In keeping with the order to surrender within four weeks, he has to give himself up before the designated TADA court by 18th April.
The actor has the option of filing a review petition and, in the event of failing to get relief, he can file a curative petition, the sources said.
While review petition comes up before the same bench which heard his appeal against the trial court’s order sentencing him to prison, the curative petition is heard by a larger bench.
Though the actor can also seek pardon from the state governor, he has gone on record to say he would not.
Amid a growing clamour for his clemency, Sanjay Dutt, 53, had told the media on 28th March that he would not apply for pardon.
“There are many other people who deserve pardon. I want to tell with folded hands to the media, the honourable citizens of the country, that when I am not going for pardon then there can be no debate about it,” Sanjay Dutt, who repeatedly broke down during his interaction with the press, said.
Governor K Sankaranarayanan had earlier this month sent over 60 representations and petitions received by him from various individuals and organisations, both seeking and opposing clemency for Dutt, to the state home department.
These petitions included those from PCI chief Markandey Katju and expelled Samajwadi Party leader Amar Singh.
Meanwhile, racing against time, the actor has set up a dubbing studio at his home and is trying to finish all pending projects.
The Sahara group chief and three others made a personal appearance before SEBI. However, Mr Roy continued his tirade saying that the market regulator was more worried about his personal assets than refunding the money to investors of Sahara