'FIIs in a whirlwind, market to correct another 10%'

ING Vysya Investment Management said on Tuesday that it expects the markets to pick up only in the second half of 2012 and sees a further 10 percent correction in the markets over the next two quarters.

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The global uncertainty and disappointing earnings have eroded customer confidence, which resulted in a fall of almost 25 percent in the Sensex and Nifty this calendar year, the report notes.

“We see the market stabilising from the second half of 2012, and if policy initiatives do make a comeback and there are no other major global shocks, the Sensex may touch 17,500 level by year-end. However, I am of the firm belief that the market is yet to bottom out and a further 10 percent correction is on the anvil,” ING Vysya Investment Management chief investment officer Ramanathan K said .

“The first two quarters of this fiscal saw significant slowdown in the earnings growth, which led to sharp downward revision in earnings estimates. FY12 earnings growth estimates have seen a decline from around 19 percent in April to around 10 percent at present,” he said.

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However, he noted that most of the fundamentals like savings and consumptions are still in pink of health and that only investments have faltered so far, pulling down sharply the October factory output numbers.

The report said the foreign institutional investment this year has been much lower compared to the past two years and it does not see the trend reversing in immediate future. But on an absolute basis, it must be minus three percent from the record $30 billion they pumped into the country.

It seems the FIIs are caught in a whirlwind, with the sharp fall in stock valuations and a sharp fall in the rupee. The report said the rising inflation could be tamed by March 2012 and the Reserve Bank to start monetary easing.

PTI