Volatility in Indian market is likely to continue till May when New York-based MSCI Inc. rebalances its global indices, the first time after domestic exchanges decided to end pacts that allowed local stock and index futures on overseas bourses.
“Until then what we are seeing is that the market is certainly turning short-term oversold,” Mohammed Apabhai, head of Asia-Pacific trading strategies at Citigroup Global Markets, told BloombergQuint in an interview. Foreign investors may not sell but they won’t buy and “we are actually seeing that in the bond, foreign exchange and equity markets”.
MSCI termed Indian exchanges’ move to stop sharing data with overseas peers as anti-competitive and warned that it could lead to a change in market classification for India, currently clubbed with emerging nations with a weight of 8.4 percent. MSCI will review its global benchmarks in May, including the emerging markets and India indices. The MSCI India Index includes heavyweights Reliance Industries Ltd. and Infosys Ltd. among others.
Foreign investors sold stocks worth Rs 3,687 crore so far in March, after paring their holdings by Rs 11,288 crore last month.
Apabhai said the co-relation between the bond, currency and equity markets in India is actually starting to pick up. India with its twin deficits—capital account and fiscal deficit—needs foreign fund inflows to plug the gap. “Without that, we are actually seeing that currency and the bond market are weakening. As a result, bond yields go higher.”