The year 2008-09 continued to be a dismal year for the stock markets. As a reflection of the economic and financial market outlook, the year was characterised by depressed equity valuations. Equity price indices in most advanced economies were relatively flat during July and August 2008, but caught on the downward spiral subsequently, which continued into the first two months of 2009.

Trends in the Primary Market  

During February 2009, there was one public issue (one Initial Public Offering) which mobilized Rs. 23.84 crore. There was no rights issue during the month. During February 2008, there were 4 public issues (all IPOs) which mobilised Rs.  1,893.21 Crore and 2 rights issues which mobilized Rs. 16,935.06 crore. During 2008-09 (April - February), there were 21 public issues which mobilized Rs. 2,082.35 crore and 21 rights issues which mobilized Rs. 11,997.31 crore  as  compared  to 88  public  issues  which mobilized Rs. 54,017.68 crore and 26 rights issues  which mobilized Rs. 30,454.10 crore during 2007-08 (April - February).

In February 2009, no QIP was issued, whereas in February 2008, there were 3 QIPs which mobilized Rs. 2,017 crore. During February 2009, 24 preferential allotments (Rs. 783.50 crore) were listed at BSE and 11 preferential allotments (Rs.  490.02 crore) were listed at NSE. During 2008-09 (April - February), 350 preferential allotments with issue value of Rs. 2, 07,884.15 crore were listed at BSE and 253 preferential allotments with issue value of Rs. 40,227.73 crore were listed at NSE.

BSE Sensex closed at 8891.61 on February 27, 2009, as against 9424.24 on January 30, 2009, registering a fall of 532.63 points (5.65%). In terms of closing value, Sensex recorded a high of 9647.47 on February 10, 2009 and a low of 8822.06 on February 24, 2009.

The market capitalization of BSE, was lower by 4.56% from Rs. 29,99,524.89 crore as on January 30, 2009 to Rs. 28,62,871.48 crore as on February 27, 2009. The market capitalization of NSE was also lower by 4.40% from Rs. 27,98,706.54 crore as on January 30, 2009 to Rs. 26,75,622.42 crore as on February 27, 2009.

The monthly turnover of  BSE  was  lower  by 22.95% from Rs. 70,509.50 crore in January 2009 to Rs. 54,329.74 crore in February  2009. The monthly  turnover  of  NSE,  too  was  lower  by 21.62% from Rs.  1,91,183.52 crore in January 2009 to Rs. 1,49,857.46 crore in February 2009.The P/E ratio of BSE Sensex was 12.55 as on February 27, 2009 against 12.85 as on January 30, 2009. The P/E ratio of S&P CNX Nifty was 13.12 as  on  February  27,  2009  against  13.40  as  on January 30, 2009.

The primary market segment of the domestic capital market witnessed a weak trend during the third quarter of 2008-09. The resources raised through public issues declined sharply to Rs.14,007 crore during April-December 2008 from Rs.49,215 crore during the corresponding period of 2007.

Global financial market conditions deteriorated substantially during the second quarter of 2008. The failure of banks and financial institutions also broadened geographically from the US to many European countries. As a result, funding pressures in the inter-bank money market persisted, equity markets weakened further and counterpart credit risk increased. Central banks continued to take action to enhance the effectiveness of their liquidity facilities.

According to RBI, the financial markets in India , which remained largely orderly from April 2008 to mid-September 2008, witnessed heightened volatility between mid-September and mid-October 2008. In the foreign exchange market, the Indian rupee generally depreciated against major currencies. Indian equity markets declined in tandem with trends in major international equity markets. Liquidity conditions tightened since mid-September 2008 reflecting adverse developments in international financial markets, apart from domestic factors. Mobilisation of resources through private placement declined by 15.7 per cent to Rs. 79,594 crore during April-September 2008 as against an increase of 25.6 per cent during April-September 2007. Public sector entities accounted for 51.5 per cent of total mobilisation as compared with 38.5 per cent of total mobilisation during the corresponding period of last year. Resource mobilisation through financial intermediaries (both from public and private sector) registered a decline of 34.8 per cent over the corresponding period of last year, accounting for 50.9 per cent of the total mobilisation during April-September 2008. Resources raised by non-financial intermediaries also registered a decline of 21.1 per cent (49.1 per cent of total resource mobilisation) during April-September 2008 over the corresponding period of last year

The primary market segment of the domestic capital market witnessed slackness in resource mobilisation during the second quarter of 2008-09. Cumulatively, resources raised through public issues declined sharply to Rs.12,361 crore during April-September 2008 from Rs.31,850 crore during the corresponding period of 2007. The number of issues also declined considerably to 32 from 60. Out of 32 issues during April-September 2008, 19 were initial public offerings (IPOs) issued by private sector companies, constituting 16.0 per cent of total resource mobilisation. Furthermore, all the issues during April-September 2008 were equity issues by private non-financial companies except one issue by private-financial company. The average size of public issues declined to Rs.386 crore during April-September 2008 from Rs.531 crore during April-September 2007.

The performance of the domestic stock markets during the first half of 2008-09 witnessed several phases. In the first phase between April 1 and May 21, 2008, the markets staged recovery. On May 21, 2008, the BSE Sensex registered gains of 10.2 per cent over end-March 2008. The upward trend was attributed to better than expected fourth quarter results of 2007-08 declared by IT majors, net purchases by FIIs in the Indian equity market and some easing of international crude oil prices. The later phases saw a marked volatality in the market.

The role played by FIIs in the market becomes crucial. According to the data released by the SEBI, FIIs made net sales of Rs.32,298 crore (US$ 8,006 million) in the Indian equity market during 2008-09 (up to October 13, 2008) as against net purchases of Rs.61,992 crore (US$ 15,061 million) during the corresponding period of the previous year. Mutual funds, on the other hand, made net purchases of Rs.6,452 crore during 2008-09 (up to October 13, 2008) as compared with net purchases of Rs.3,265 crore  during the corresponding period of  last year.

The sectoral indices witnessed a downward trend during the current financial year (up to October,2008). Selling pressure was witnessed across the board, viz., metal, consumer durables, capital goods, auto, oil and gas, public sector undertakings, banking, IT, fast moving consumer goods and healthcare sector stocks.

In tandem with the downward trend in stock prices, the price-earnings (P/E) ratios of the 30 scrips included in the BSE Sensex declined from 20.1 at end-March 2008 to 16.2 at end-September 2008. The market capitalisation of the BSE also declined by 18.9 per cent between end-March 2008 and end-September 2008. The turnover of both BSE and NSE in the cash segment during April-September 2008, however, rose by 16.7 per cent over that in the corresponding period of 2007. The turnover in the derivative segment of both BSE and NSE also increased by 10.6 per cent during April-September 2008 over the corresponding period of the previous year. The volatility in the stock market measured as coefficient of variation, also increased during April-September 2008.