Sensex and Nifty at current levels – A reality Check ( **** On popular demand )

This was a post long overdue that I was supposed to make sometime back but again for the umpteen time I would blame it on the schedule of my work. Blogging requires a disciplined effort and to maintain the same has been a real challenge for me in the last few months.Any way this weekend couple of my friends came out with some observations and said that I need to blog about my second passion: Stock market and Investment! Now that the last couple of weeks market has been like a roller coaster ride with no predicted behavior. The market has bee bottoming out so mercilessly with every week being a nasty bloodbath on the trading floor.  So here I am doing that . This post is chiefly after many friends from the knowledge foundation nudged me to chip in my views on the TKF meeting held earlier today.  Before I talk about the Stock market we need to talk about the factors that has been chiefly responsible for the current trend in the market.

Inflation and pulse of the Indian Economy: Inflation in Indian environments is at an all time high. Partly this inflation seems to be due to unequal balance of trade and due to the various payments and the slowly progressive shift of the GDP thrust towards the Services sector from the traditional sectors like agriculture.

Budget 2007: For the last couple of years the Indian budget has become a non event with all reforms moving on predictable directions with no eventful subsidies or sudden taxation on the public. This time again there were so many areas where the India Inc was expecting the finance minister to announce relief and subsidies like on the Individual Income bracket and so on. Just by raising the slab by 10000 has made no visible difference at all to the salaried individual. This created a sort of disappointment among the masses. Announcing subsidies on pet food, later products and related sector has been such a let down. From the corporate point of view MAT (Minimum alternate tax) and continuance of the fringe benefit tax and increase of the tax net to include ESOP on FBT have all added to the damage. But at the same time increasing cess by 1% to create a prudent reserve  to fund for secondary education and more outlay for agriculture and agri based projects has been a great boost on the long run for the economy whose effects we will definitely find at a long term.

Global Markets: Weakening of the Yen due to increase of the interest rates by the bank of Japan in the recent times has overheated the Nikkei Index. This has led to the cascading effect felt at the HanSeng, Kospi, Mesdaq and this has finally had its effect in Russian and Indian market as well.

Sensex and Nifty at Current levels: Sensex and the Nifty have been on a bull ride for a very long time as per the complaints of many a financial experts. This has really overheated the markets and this has led to the index taking a correction and in response to this correction a lot of FDI and FII have been withdrawn from the Indian market over a period of the last few weeks amounting to more than $40 million. All these investors have evened out their position and have gone for greener economies like Brazil and China. This week will be similar to the last few weeks with rocky atmosphere. Market will continue to be ruled by the bear hug for next few days as most futures are expiring and the up trend will start from the second or third week of April conventionally. But with this kind of market breadth you never know where it will end.

Large caps, mid caps and Small caps: All three categories of stock immaterial have suffered a great deal of damage in the market. One of the major market movers like reliance has actually been a laggard in the market along with major IT stocks also taking the beating. Communication stocks like RELCOM have taken major blows. Mahindra and Mahindra has also been performing badly. After the news surrounding Vodafone Essar, companies like Bharti have announced aggressive plans to take the competition by the horns but this has not brought the anticipated positive trends owing to the market slump. Sun TV has also been suffering badly until news like the successful launch of Insat 4 B have brought some life in this stock as this company is planning DTH services in a big way in south India and in Insat 4 B it has booked some major space to take off this service. At current levels excellent picks will be Reliance, bharti, suntv at every new lows with  wait watch approach for Mahindra and Mahindra and Sesa Goa.

Infrastructure stocks like Atlanta limited, Parsvanath builders, Unitech, Action Construction, Sobha developers and Lanco Infratech have taken a severe beating in this down trend. The downtrend is so bad that the SEBI is trying to find new valuation methods to keep check on these companies financial ratios.  However in this space companies like GMR Infrastructure have been performing well.

Among the IPO’s post budget the only scrip that has been an out performer is Mindtree Technologies. Predictions about the high value of this stock and my recommendations for the investor can be found on this post

written 4 months back. This seems to be the only stock that has performed exceedingly well. At the current levels the stock looks very much overweight and so recommend investors to be cautious to take any long positions. Another Stock that has performed reasonably well is GBN – Global broadcasting network (CNN-IBN) . At current levels excellent picks will be Page industries, First Source Solutions (formerly ICICI Once Source), Indian bank and Mudra life style.

Lets wait and watch this week folks. Good night and good luck!.

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3 thoughts on “Sensex and Nifty at current levels – A reality Check ( **** On popular demand )

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