In a departure from big gains in the past two years, investors saw around Rs 20 lakh crore of their wealth eroded as Indian equities tanked in 2011 because of inflation, high interest rates and the uncertain global growth environment accentuated by the euro zone debt crisis.

In addition, the rupee fell to historic lows against the US dollar, hitting the country’s import bill.

The bellwether indices of the Bombay Stock Exchange as well as the National Stock Exchange fell by over 26 per cent during the course of the year, touching new lows.

The 30-scrip BSE Sensex was down by 5,334.01 points, or over 26 per cent, at 15.175.08 on December 20, against last year’s close of 20,509.09. Similarly, the 50-share Nifty witnessed a hefty fall of 1,590.30 points, or 25.92 per cent, to 4,544.20 on December 20 from last year’s close.

There has been some recovery since then, with the Sensex closing at 15,873.95 and the Nifty at 4,750.50 yesterday, but market experts say investors remain cautious on India.

Globally, the deepening European debt crisis and a historic downgrade of US creditworthiness hit the economic growth sentiment.

Besides, political turmoil in the Middle East pushed up global crude oil prices, adding to inflationary pressures and pushing up the country’s import bill.

FIIs, the main drivers of the market, turned negative on Indian equities this year and after having injected a record Rs 1,33,266 crore, or over $29.36 billion, in 2010, pulled out Rs 2,497.50 crore, or $318.00 million, from equities till December 19.

Meanwhile, as per Sebi data, they pumped in Rs 39,637.50 crore, or over $8.2 billion, into the debt market till December 19.

Software services companies dropped on concerns over the slowdown in US and European markets, which contribute nearly 80% to their revenues. However, the steep fall in the rupee value brought some relief for them as their revenues and margins would increase in rupee terms.

Telecom stocks came under pressure as the spectrum allocation scam took a toll on the sector, with several corporate head honchos, senior government officials and political leaders, including former Communications and IT Minister A Raja put behind bars.

In the Union Budget 2011-12, Finance Minister Pranab Mukherjee cut a surcharge on corporate tax to 5% from 7% and projected a lower fiscal deficit target of 4.6%.

For more visit: Business Standard

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