Market View by Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

 

The unusual volatility in stock markets is reflected in the 8% spike in Shanghai Composite Index and the 4.8% crash in Nikkei index yesterday. This extreme volatility is likely to stabilise soon.

The hoped-for-recovery in the Chinese economy has triggered massive fund flows into Chinese stocks. This has delivered 20% returns in Shanghai composite in the last five days and 19.45% return in Hang Seng in the last one month. This momentum is attracting FIIs; but it remains to be seen how long this tactical trade will last.

FII selling is likely to be absorbed by DII buying and, therefore, it is unlikely to do serious long-term damage to the market. Since a significant part of FII holding is in banking stocks, this segment may continue to face downward pressure.