Investors have much to worry, banks may continue to decline

MUMBAI: Investors are bracing for a turbulent period in the short term with the Chinese markets set to open after a week-long holiday on Monday. Sentiment is likely to be nervous as investors will look for signs of further devaluation of the Yuan with China looking to revive exports.

But, further weakening of the Yuan may accentuate foreign investor selloff in emerging markets. Bank shares may continue to be under pressure on Monday after Bank of Baroda posted a whopping `3,300 crore loss for the December quarter. “China will see a huge selloff because we have seen an almost 8-10% decline across global markets,“ said Pankaj Shama, executive director and head of equities at Equirus Capital. “If it is down by anything less than 56%, I am okay.But if it down more than 8-10%, it will trigger a fresh selloff in emerging markets.“

Last week, the benchmark indices posted their biggest weekly fall of over 6% in over six years following foreign institutional selling to the tune of almost `2,400 crore.Uncertainty about US Fed's policy stance prompted FIIs to step up selling.

So, far in February, these investors have net sold shares worth Rs 3,000 crore. They sold close to `11,400 crore in January . “The negative news flow refuses to die down,“ said Vivek Mahajan, head of research at Aditya Birla Money .“Investors have already taken big hits and as a result there will be a cautious flair in the market.“