Indian Stock Markets Are Down-VRK100-05Oct2011

Reasons for the recent weakness in Indian stock markets:

Ø      India’s GDP growth rate is slowing down

Ø      The sovereign debt crisis in eurozone and the US are making investors nervous about India’s exports and GDP growth

Ø      The recent rupee depreciation against US dollar is also stoking fears that some Indian companies may record losses due to foreign exchange losses in their profit and loss accounts

Ø      Foreign Institutional Investors (FIIs) are net sellers this year

Ø      Bank deposits are giving assured annual returns of 9 per cent to 11 per cent. As such, investors find deposits more attractive compared to stocks.

Ø      Several stocks in the real estate, construction and infrastructure are hit by scandals and bribery charges

Ø      Banking stocks too are losing heavily due to rising interest rates and concerns about quality of assets and compounded by Moody’s downgrade of State Bank of India’s credit rating

Ø      Market participants believe that policymakers are not doing enough to push for economic reforms

Ø      Investment cycle is down and project clearances are affected due to environmental factors and land acquisition problems