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Dubai: The global stock market rout for the second consecutive day on Tuesday cast a spell of gloom among Indians in the UAE who have invested both locally and in their home country.
A large number of them expressed disbelief and desperation following the sharp decline in the Bombay Stock Exchange (BSE).
Trading in BSE was halted for an hour after the Sensex dropped 2,230 points, or 12.7 per cent, to 15,375.29 at 11.54am India time.
When the market resumed trading the index recovered partly and closed at 16729.9, down close to five per cent from the previous closing.
The S&P CNX Nifty, comprising 50 companies, fell 747.30 points, or 14.3 per cent, to 4,461.5 in initial trade. It recovered and closed at 4899.30, about six per cent down.
The Sensex has now slumped more than 20 per cent from its closing peak on January 8, joining benchmarks in Asia and Europe in a bear market and extending a global sell-off that has wiped off more than $5 trillion from stock markets this year.
Disbelief
"I just can't believe that about half of my investment has vanished into the thin air. The losses include a significant portion of my capital because I entered the market in late December when the Sensex was above 20,000," Rose John, a Sharjah-based bank employee.
Rose was not alone on Tuesday. There were a lot of new investors who were shocked at the spectacular decline on the BSE.
Traditionally the majority of Gulf-based Indians have been timid investors who usually stick to fixed deposits and real estate.
The rupee's strong appreciation and the virtual drying up of interest rate and foreign exchange arbitrage opportunities and steep fall in real interest rates have driven many of them to seek fortunes in stock market-related investments.
Investors based outside India bought $17.2 billion of Indian shares last year as soaring economic growth lured funds, sending the Sensex to fresh records.
Indian shares plunged, forcing stock markets to halt trading within a minute of opening, after tumbling commodities prices and a drop in Asian markets added to concern world economic growth is faltering.
"The global link to the market crash is obvious. But the immediate reason for the decline was unwinding of derivatives positions as the market opened," said P Krishnamurthy, chief executive of Financial Services Division of Al Rostamani Group.
While the unprecedented growth in stock markets delivered strong appreciation on investments, many middle class salary earners too started investing in Indian stocks directly and through mutual funds.
Seasoned investors and investment advisors believe there is no reason to panic yet.
Strong growth
"The Indian stocks are supported by a strong growth story," said Shaikh Sultan Bin Saud Al Qasimi, Chairman of Barjeel Geojit Securities, the financial services company that caters to a large number of Indian investors.
"The economy is growing at around 10 per cent per annum. A market correction can't wipe up out the huge potential of the economy backed by strong corporate performance. What we are seeing is a knee-jerk reaction to the global market instability."
Bankers and market pundits concur that the Indian growth story can withstand the current turmoil.
"A correction was widely expected due to the over exuberance," said Chetan Mehra, regional head of Private Banking and NRI Services of ICICI Bank.
"In a boom market, often people lose touch with reality. The current situation is largely the result of global market corrections that has prompted the many institutional investors and hedge funds to sell off."
"Panic should be substituted with patience. In three to four months, the market should bounce back. People should take this as an opportunity," said K.V. Shamsudin, director of Barjeel Geojit.
But worried investors believe they are in for a long downturn. "I recently started investing in the stock markets through SIP (systematic investment planning) route and have taken exposure to 11 mutual funds," said Bakul Gala, vice-president of Adfactors, a public relations firm.
"The value of my investments [assets] have dived by a phenomenal 15 per cent whereas the idea was to make profits between 20 per cent to 25 per cent. So in a way I have lost around 40 per cent," said
Some investors were trying to be philosophical about the losses. "This is the worst carnage that I have seen in years," said Manish Vora, interior designer, Saifee Interiors.
"But I don't understand one thing: why do people invest in stock markets if they get jitters with downfalls. This is stock market. Basically, it was not predicted that it will fall this much,"
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