(Feb 16): India’s US$5.2 trillion stock market has had a soft start to the year, and it could face further pressure as new regulatory measures to moderate trading activity add to existing concerns about corporate profit growth and foreign flows.
Late Friday, the country’s central bank tightened rules on bank loans to proprietary traders and stock brokers, a move that may curb leveraged trading. Earlier this month, taxes on equity derivatives were raised, unsettling markets, and the market regulator later hiked margins for a popular trading strategy.
Together, these measures come just as a US trade deal had begun to lift sentiment. The market has been trying to recover from its weakest start to a year in a decade, with investors already concerned about modest earnings growth, a rout in software services stocks and relatively high valuations — factors that could weigh further on foreign investment flows.
Shares of capital market-related stocks slumped on Monday in Mumbai trading. BSE Ltd, the country’s oldest bourse operator, fell as much as 9.9%, while key brokerage Angel One Ltd’s shares tumbled 9.5%. Commodity bourse operator MCX’s shares slipped 7.4%. The stock benchmark NSE Nifty 50 was little changed in early trading, in line with a gauge of Asian stocks.
Global funds and domestic individual investors have together withdrawn about US$2 billion from local shares so far this year. Meanwhile, overseas investors began the week holding more short than long positions in Indian index futures, extending their net bearish stance for a 17th consecutive month.
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Uploaded by Liza Shireen Koshy
