Strong fundamentals to hasten recovery in Indian equities: Experts

Strong economic fundamentals have the potential to hasten the recovery in Indian equity markets after Monday's massive decline, said analysts.

Devendra Nevgi, chief executive of ZyFin Advisors, predicted that the strong fundamentals will help India standout from its peers and hasten the recovery in stock and currency markets.

"The Indian economy's fundamentals are very strong, be it growth, be it lower current account deficit, slowdown in inflation, pickup in consumer sentiment and hopes of a rate cut. These factors will contain the fall and hasten recovery in India faster than other markets," Nevgi told IANS.

"The low global commodity prices and attractive valuations after the massive correction should lead the investors back."

Notwithstanding the strong fundamentals in the Indian economy, the huge losses in the day's trade will push policy makers to urgently restart stalled reforms especially movement on the goods and services tax (GST) said Dipen Shah, head of private client group research with Kotak Securities.

"It should be a priority for the government to restart the reforms process now. The world economy is stalling and the US rate hike decision is coming up in September, this is also an opportune time for the Reserve Bank to have a re-look at the policy rates," Shah said.

At the same time, foreign funds outflow from India to the US in the hindsight of the upcoming rate hike decision was expected said Vaibhav Agarwal, vice president and research head at Angel Broking.

"The US Fed is expected to take a call on raising the US rate hike in over a decade. This is a major catalyst for the movement of the foreign funds from India and other EMs back to the US," Agarwal told IANS.

"However, lower commodity prices and strong fundamentals plus a push towards infrastructure creation will propel the economy. This will certainly catch the attention of the global capital markets once the turmoil has subsided."

On the bright side, the massive correction is expected to make valuations attractive for not only foreign investors but domestic ones too. Gaurav Jain, director with Hem Securities, pointed out that buying might take place if the Nifty crosses the 8,040 level in Tuesday's trade.

Spooked by a crash in Chinese bourses and unmindful of the assertions by policy makers that the turbulence was transient and the country's economy remained strong, the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) lost as much as 1,624.51 points, or 5.94 percent -- which was the steepest in terms of points.

In this turmoil, the Indian rupee also fell to its lowest in two years at 66.74 to a dollar. The Sensex's massive fall on Monday surpassed its previous highest closing loss of 1,408.35 points on Jan 21, 2008.

In terms of percentage, the loss of nearly 6 percent on Monday was around a half of the steepest fall of 11.13 percent in the Sensex, which was logged on May 17, 2004, data available with the Mumbai bourse showed.

The wider, 50-scrip Nifty of the National Stock Exchange (NSE) followed a similar trend to close 491 points, or 5.92 percent, down at 7,809 points. In both bourses as much as Rs.7 lakh crore ($100 billion) was wiped out in terms of marketcap.

"International investors are pulling back funds from emerging markets especially China. There is a slowdown there. The clear and present danger now is the slowdown impacting the US and European based companies," Anand James, co-head, technical research, Geojit BNP Paribas, told IANS.