In the recently ended September quarter, Sensex has lost 2.6 percent, its sharpest fall in the last 11 quarters. The 30-share index has gained in eight quarters and declined in the remaining three.

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After climbing to an all-time high of 40,312 on June 4, the BSE Sensex started a downward trend. It shed 10.4 percent from its peak till September 19 before the government cut corporate tax rates on September 20. The index surged 1,900 points on September 20, logging the biggest single-day gain since May 2009.

The foreign institutional investors (FIIs) that have also been on a selling spree for the past two months post the introduction of FPI surcharge in the Budget on July 5, reversed their course post the corporate tax cut announcement.

In the last week of September, the government slashed the corporate tax rate by around ten percentage points. Besides, Sebi also simplified know-your-customer (KYC) requirements for FPIs and permitted them to carry out the off-market transfer of securities.

The FIIs pulled out stocks worth Rs 12,419 crore and Rs 17,592 crore in July and August, respectively, while in September, post-tax sops invested Rs 7,548 crore in Indian equities. However, it did not check the overall quarterly outflow. The September quarter witnessed the second-highest quarterly withdrawal, worth Rs 22,463 crore, since December quarter of FY17 (Rs 30,726 crore). In October so far, FIIs have pulled out Rs 3,825 crore.

According to analysts, the outflow is on account of fears of a global recession, trade war as well as an economic slowdown in India. However, they added that inflow may improve in case of good corporate earnings.

Brokerage firm Prabhudas Lilladher believes that festival season holds key to recovery with normal monsoons and government stimulus acting as crucial drivers. Even though FII outflows have slowed down, DII inflows have increased, but the near-term outlook remains hazy.

First Published:Oct 9, 2019 1:24 PM IST