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Stock market plunge not likely to drag retail

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The crash in the stock market plunging the Sensex to 17,307.90 from a high of 19051.86, would not impact on the retail sector since most of the investment has been by foreign institutional investors (FIIs) and heavyweights like Reliance, Tata and Larsen & Toubro.

“I don’t think the crash of the stock market would have any impact on the retail market. Even the regulator Securities and Exchange Board of India (SEBI) laying down the guidelines on Participatory Notes (PN) would not have any effect on retail,” Bijou Kurien of Reliance Industries told Indiaretailing.

Anurag Rajpal of RPG too felt that this crash would not have an effect on the retail sector as “it has been heavyweights like Ambanis, Tatas and L and T who have been contributing to the stock market.”

This is clearly illustrated by the fact that Reliance Energy was the biggest loser in the Sensex, as it was down by as much as 11.5 per cent at Rs 1,685. Bharti Airtel lost a little over 9 per cent at Rs 1,008. ICICI Bank, State Bank of India, Mahindra & Mahindra, NTPC, HDFC, Tata Steel, Reliance Communications, BHEL, Larsen & Toubro, ACC and Maruti Udyog have lost 6 per cent to 8 per cent.

“It is more due to large flow from FIIs amounting to over US$15 billion that pushed the Sensex to the high of 19,051.86,” Rajpal told Indiaretailing.

Adopting a cautious approach, Chitranjan Dar of ITC felt “it is too early to say anything right now. Let us wait and see how the market develops.”

However, as the Securities director, Gagan Banga of Indiabulls, said “Retail investors have not really regained confidence (in the market) as a result of repeated scams and scandals. A key point missing is the understanding that the market is safe for retail investors. Apart from this, historically, retail participation in Indian equity market has been abysmally low.

“In fact, only a negligible percentage of household savings is invested in stocks and bond markets. Indian market is getting increasingly institutionalised. But now that we are having an uptrend, we are seeing more investors entering the market through insurance and structured products.”

“Retail investors are not entering the market directly; a large chunk of their investments are routed through Unit Linked Insurance Plans (ULIPS). The absolute value of investments may not have changed much as consequential to market capitalisation of India Inc. increasing over the past one year… net retail investment in percentage terms should reflect a downtrend,” said Sameer Narayan of ABN Amro

The Sensex, which plunged to 17,307.90, has now recovered to 18,125.64, but still remains deep down in the red with a huge loss of 926.22 points or 4.86 per cent. At 5401.25, nearly 300 points off its low of 5107.30, the Nifty is 4.71 per cent or 266.80 points behind its previous closing mark.

– Sri Krishna

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