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Is honeymoon period for markets over?

, June 24, 2014, 2 Comments

India Equity Market-MarketExpress-InAttribute to Iraq conflict or anything, On Friday Equity markets corrected the most in past four and half months. Midcaps were even more butchered and it seems honeymoon period or Hope rally as popularly called came to an end. Investor / Traders resorts to book profit and mainstream market tanked by 1.5%. Crude oil spiked crossing $114 a barrel following attacked in key geographies by militant group in Iraq.

After BJP led NDA, winning with thumping majority from May 16 to yesterday selected PSU’s have flared up drastically in the hope of more autonomy, big bang reforms and starting up stalled projects. Market always trade ahead of its fundamentals and hope got cemented after 1st visit of PM with all bureaucrats.

Uncertainty and Volatility
The correction is much needed and it may prove healthy over longer period of time. The manner in which IT and Pharma stocks made a come back is also worth noting. Intraday volatility and sector rotation indicates uncertainty. May be for the time being market may settle little lower adjusting to unfolding current situation domestically and globally.

Debt ridden companies whose fundamentals hasn’t change much over last couple of months but just run-up in the wake of new government are in reverse gear. IT major INFY put speculation to rest after appointing Vishal Sikka, An outsider to head the company. This is first of its kind and changes are very well received by the analyst community.

Should one Buy or Wait?
It seems budget market will not see sharp sell off if Global scenario is contained with. Increasing IT exemption limit, Inflation and Fiscal Management, Shortage in Rainfall, treatment of Security Transaction Tax (STT), Incentivizing Retail Investor to divert resources from Gold and Real Estate to financial instruments are some key issues, which may set the tone for next up move.

As far as stressed sector such as Banks, Steel, Infrastructure, Real Estate are concerned they are already showing signs of revival but for next couple of quarter, lag effect will be visible. Though one must realize that lot of positives are already priced in such Stocks.

After May 16 many brokerages domestic as well as foreign ones come up with revised SENSEX targets, which were eye popping and it created desperation among the investors sitting on ideal Cash to invest or miss the rally.

But one should not read too much into these reports as market may or may not go to the predicated fancy levels but individual stocks may give healthier returns based on their management and balance sheet strength coupled with favorable government policies.

One can make quick bug based on buzz and momentum but for serious money appreciation, proven path of sound investment is the way to go forward.

One could consider and finalise in this noisy situation, the stocks which still hold promise for the next 3 to 5 year period. NTPC, IDFC, ONGC, ICICI BANK and TATA STEEL are some of blue chip stocks worth keeping in mind.






  • Shamik Bandyopadhyay

    Share market will take 1 to 2 years to stable and reflect the true fundamentals of the economy. Today, it is playing on speculations. So, we should not concentrate much on that. Important is to see how government is functioning and applying it’s plan in the field. Once the true investment start pouring in the economy, the market movement will earn it’s importance.

  • MoneyGames

    I agree with you. Post all the speculations, earnings over the next 1 – 2 years (and earnings quality) will be when the rubber hits the road.