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`Steps on equity meltdown may not show results now'

Our Bureau

MUMBAI, Sept. 17

THE measures being proposed by the Government to stem the meltdown in the equity markets might give respite but only in the long-term, say analysts and dealers.

The Government said that it would consider a host of measures including hiking the FII ceiling to 74 per cent from the present 49 per cent, allow margin trading and relax the five per cent limit of creeping acquisition.

These measures are aimed at increasing the liquidity in the cash-strapped capital markets by also encouraging and facilitation buy-back of shares.

Speaking to Business Line, a DSP Merrill Lynch official said these measures, albeit positive, will not be able to stem the fall in the markets in the short-term. ``AT the moment, the markets are gripped in a frenzy as investors want to get out as the thr eat perception of a war-like situation is very real and its possible fallout in India. The Asian markets plunged and Indian markets will be no different,'' he added.

The market outlook for the ensuing week is also bleak with dealers and analysts expecting the markets to dip further in the aftermath of the US markets also taking a hit. ``It all depends on the New York Stock Exchange and the Nasdaq. If the US exchanges are not able to curb the fall, then there is a definite impact on the Indian markets for the next two to three days,''said an analyst.

Unwinding of equity investments by major foreign institutional investors totally is also not ruled out. Around four major FIIs are being touted to entirely sell out their equity investments in the next few weeks.

``There has been panic selling in the markets by FIIs and there is a definite possibility of FIIs pulling out totally from India as the threat-perception in the Asian regions grow. For them (FIIs), the investment in India does not account for a significa nt amount as opposed to their global investments,'' said the analyst.

The FII outflow in the past four days have been significantly higher at an outflow ranging over Rs 200-300 crore in the past few days, said dealers. But all is not lost, domestic financial institutions are expected to buy equities in order to help lift u p the depressed market.