Why is The Sensex Falling?

April 22, 2015

Imarticus Financial Analyst Program is one of the leading corporate finance and banking courses in Mumbai.

April has been a lackluster month for the Sensex as Tuesday saw it’s fifth day of unabated decline- 210 points. That makes it 1400 points in five days. The Nifty ‘s face was of course similar breaching the 8,400 level for the first time this month. Yet our factory output numbers are up and our inflation is softening. So what’s the problem?

Everyone seems to have their own theories, a mixture of global macroeconomic indicators combined with Micro trends such as Japan’s Daichi sell off of Sun Pharma and weak IT earnings. Here’s our list:

  1. Global woes: The Greek tragedy will most certainly reach its climax soon; the default seems inevitable. And that leads to panic and in any financial panic attack, emerging markets seem to suffer the most as global investors consolidate. One fifth of our exports are to Europe, so we the ensuing impact is not minimal. Then there’s China, who is slated to grow at its slowest pace in a decade. FII’s have already turned net sellers selling cash shares worth Rs 650 crore on Friday and Rs 1,500 crore on Monday. MAT has also played it’s part. Notices have been issued to several asset managers asking them to pay a Minimum Alternate Tax or MAT on capital gains made during previous years. The government says tax dues worth Rs 40,000 crore are pending.
  2. Earnings: We at the Imarticus Financial Analyst Program have saying that the sun has been setting on the IT industry for a while now. IT companies continue to disappoint markets with insipid earnings. HCL Tech, India’s fourth largest outsourcer, saw a fall of 10 per cent after it missed profit estimates for quarter ending March 2015. TCS also reported a fall in revenues resulting in an IT sell off. Then there is poor industrial demand and woes of unseasonal rain. Economic Times has estimated a sales growth as low as 0.7 for Q4.
  3. Banking, rates and the slow credit off take- RBI is taking its time to cut interest rates and banks have been slow in lowering lending rates. Companies are not taking loans. Current Bank rate is 8.5% and CRR is 4%.

Interested in why the Sensex is falling and how it affects M&A. Well learn more by joining the Imarticus Financial Analyst Program- a leading Investment Banking course in Mumbai. Click here for more details. New program commences soon.

– By IFAP Student

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