BW Communities

The Good News Bears

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[It was a good week for the markets, largely because there was no bad news. Bargain hunting at lower levels from foreign institutional investors (FIIs) on back of positive news flow from Europe and impressive results from software bellwether Infosys Technologies helped keep the momentum going for the Indian equity market. It ended the week with a gain of 5.2 per cent. The momentum in the coming week will be almost purely dictated by September quarter results, especially from heavyweights Tata Consultancy (TCS), Larsen & Toubro and HDFC Bank. Reliance Industries announced its quarterly performance on Saturday October 15, which were in line with expectations. "I don't expect much from the quarterly results. But any disappointment from biggies can bring down the market next week," says Avinash Gorakshakar, vice president at Edelweiss Financial Advisors. With the Sensex up  8.5 per cent in the past seven sessions, any disappointment will lead to a sharp correction in the market. On Monday, the mood will purely be dictated by Reliance Industries, HDFC and TCS results. TCS is expected to record a sequential quarter-on-quarter net profit growth of 6 per cent at Rs 2,520 crore. All eyes will be also on the outcome of the European Union (EU) nations meeting on  23 October 2011 that are meeting to discuss the bailout of Greece and other heavily indebted European nations. Past as Prologue? In the week ended 14 October 2011, the Bombay Stock Exchange (BSE) Sensitive Index (Sensex) ended above the psychological mark of 17,000. The Sensex gained 850 points to end at 17082.69. All thanks to foreign inflows that even forced bears (market players) to cover their short position this week. Players had gone short in the market following the concerns surrounding sovereign debt crisis in the Euro-zone, but FII buying on positive news flows from Euro-zone forced players to cover their short position, thus helping the Sensex to record gains this week. In the four sessions till 13 October 2011, FIIs invested nearly half billion dollar. However for the month of October they still continue to remain net sellers to the tune of $86 million. "The recent recovery in the market to a large extent has been due to the positive news flows from the Euro-zone," says Anand Shanbhag, ED and head of research at Avendus Securities. Though the rise is positive, he feels it's not a full recovery and there is still some uncertainty left in the market over domestic and global concerns. Domestic concerns surrounding the market are inflation, interest rates and rising energy prices, while the globally it's the European debt crisis. "Until such time one can't forecast a complete recovery. In such circumstances the index (Sensex) could stay in a trading zone up to 6 months," says Shanbhag who feels players (institutional) are risk averse to equities and it will take some time before they come back to the market. With the sharp rise in the past few sessions, experts feels there isn't much upside left in the market. But the good news is there isn't much downside either. "From the current levels (17,000), the market doesn't seem to fall over 10-15 per cent," says senior analyst at the Mumbai-based financial services on condition of anonymity.  So what should investor do in the current environment? "I see the next two quarters (September and December) bad for Indian corporate," says Gorakshakar. He still sees some pain left in the market and therefore would like to park his fund in fixed income and use the downfall to accumulate stocks. "Today I have invested 50 per cent of my money in FD (fixed deposit) which is giving me 11-12 per cent return and I am waiting for the market to correct," says Gorakshakar. With uncertainty still prevailing in the market over bail-out of European countries and Reserve Bank of India's (RBI) monetary policy on 25 October 2011, which is expected to hike rates –13 times in 19 months –to capture the rise in inflation, investors would be better-off waiting on sidelines. Rather than buying cheap in an uncertain market, it always better to buy slightly higher in a clear market environment.