Investors losing patience, money moving out of India: Pramod Gubbi

In a chat with ET Now, Pramod Gubbi, VP, Institutional Equities, Ambit Capital, shares his view on the factors that are weighing on domestic equities.

ET Now: There seems to be a mini scare/stampede in the Indian market. The benchmark indices are down nearly 10 per cent from highs. Why?

Pramod Gubbi: We could see this coming because the interactions with corporates in the run up to the earning season were signaling weakness in terms of activity on the ground.
Demand had declined and there was no sight of recovery. We were indeed heading into a quite a brutal earning season, which is now clearly panning out.

The only thing that held up the markets even during this period of negative sentiment was the fact that there was no other alternative.

Couple of months ago, India still stood the best among the rest at least from a medium to long term perspective. That has what driving the sentiment. Now, a couple of things have changed. The brutality or the extent to which earnings have been weak has hurt sentiment. The weak nature of demand in the broader economy has come to the fore and there is some sort of loss of patience among the investor community.

More importantly, there have been a couple of other markets which have stood up and taken the attention of investors. China is a case in mind. The Chinese stocks have been on the roar. We have been incrementally hearing that there is some rotation of capital out of India into China. Korea and Taiwan have joined the party in the last few days, and so as Brazil.

In between, we have our own issues in terms of taxation. Even as the FII tax by itself is not a material negative for investors, the thinking behind and the approach behind it raises questions of retrospective actions. So, that is something that the government needs to deal with.

But, it may not have been the primary factor, but it added to all the negative sentiment and resulted in this sort of weakness.