The week after the presentation of the Union Budget was cruel for investors. Investors wealth, or the market capitalisation (total market value of listed shares), fell by a whopping Rs 25,000 crore to Rs 5,94,400 crore last week. A host of negative factors like Middle East tension, Sebi proposal on FIIs and higher stamp duty in Maharashtra dampened the sentiment.The 30-share BSE Sensitive Index (Sensex) shed 130.60 points, or 3.97%, for the week, ending in the red for all five sessions. Barring select stocks in the banking sector, selling was seen almost across the board. The fears of a US-Iraq war heightened during the week after the US refused to budge from its stand against Iraq, ignoring the advice of other major nations to exercise restraint.US President George Bush said on Thursday night that he will drive Iraqi President Saddam Hussein from power if it comes to military force — with or without support from France, Germany and other allies. This made Indian investors nervous.Meanwhile, there have been concerns over a proposal from the Securities and Exchange Board of India (Sebi) that could hamper inflows from foreign institutional investors (FIIs). The proposal involves debarring FIIs from participating in trading through the participatory note (PN) route as a part of the code of conduct for them. Those FIIs who are not registered in India (like hedge funds that do not want to go through registering procedures and are typically short-term investors) invest in India through PN that are issued by foreign brokerages.Hedge funds are quite active in India. However, marketmen feel that it will be very difficult for Sebi to crack down on PN-based trading. “Positions were liquidated in the derivatives segment of the bourses as the expected post-Budget rally failed to materialise. Margin calls were triggered in a number of stocks due to falling prices,” said a dealer.The Budget was generally considered to be investor-friendly by players following landmark measures like the scrapping of dividend tax and capital gains tax. A cut in interest rate on small saving schemes, and a hike in foreign direct investent (FDI) limit of private sector banks to 74% from 49% were the other positive proposals in the Budget. Besides, there have been rumours that several brokers may face a payment crisis with the ongoing market slide.The market was also affected on Friday by reports that the Maharashtra government may withdraw concessions on stamp duty for non-delivery trades, which could push up transaction costs by a stiff 500%. According to reports, the duty is likely to be raised to Rs 1,000 for every non-delivery transaction of Rs 1 crore from Rs 200. This, if implemented, may lead to a sharp drop in speculative volumes, feel players.The fall in the inflows of FIIs also affected the sentiment. For the first four sessions of March 2003, FIIs remained net sellers to the extent of Rs 26.4 crore. Also, five schemes of the Unit Trust of India (UTI), having a total equity corpus of Rs 680 crore, will mature over the next five months. UTI has already turned an aggressive seller since the last couple of sessions.
