TIA Article – 091118

Few Words on Market… Tamilnadu Investors Association – TIA

091118: Market has witnessed a very volatile month this time. As expected a correction came in but was a typical bull market correction following the “V” pattern. Market corrected very quickly and recovered back in the same speed. We are trading again above 17000 and may head higher only if we decisively cross the immediate recent high. The correction recently, though sharp was not fully convincing, hence the risks at this point of time are still definitely higher, and the solace comes from the fact that many investors wanting to enter have been again left out.

The government has to get serious on various reforms and that could propel the GDP growth in India. We believe proper focused action can surpass the earlier highs on GDP even in present global economic scenario. The recent talks on divestment of profitable PSU’s had sent right signals to the market. The divestment should be an action towards reforms and not a move to merely fund the deficit the country is facing.

The global GDP is on the rise and yet again India and China are leading the way. We have been saying that the worst is behind us and now it depends on various governments to keep pushing programs so that the recovery could be comprehensive and not shallow.

Some of the sectors on which we are bullish are:

Banking: This is a sector which has led the recovery in the markets and hence can be entered on corrections. With the economic recovery the sector would perform well. PSU banks look more interesting at this point of time. One can enter in bank ETF’s to have a broader participation.

Shipping: One obvious sector to benefit if global business goes up, recovery may take three years to complete and hence the sector can be held on until then. There are signs of better freight rates already and some of the stocks in the sector look attractively priced.

Health Care: A sector which gets least affected even in recessions. Not many companies are listed but expect lot of consolidation in the sector to happen over next few years. Comparative lower care tariffs in India would attract more and more medical tourists as well. Mass marketing by health insurance companies for their products is also fuelling the growth of the sector. Pharma becomes a part of this sector.

Oil & Gas: Gas recently has become the most contentious issue with issues reaching as top as the Supreme Court. It is high time the auto companies start focusing on manufacturing cars run on gas. Companies involved in distribution of gas would see higher growths in the coming decade. Investors can also look into companies which cater to pipe laying and other infrastructure requirements for gas distribution.

Markets are not free from risks as of now, though fundamentals are good there are investors sitting on huge profits and it’s all sensible to book profits time to time. Long term view remains highly bullish. Timing the market is the most difficult job hence one has to systematically invest and exit on falls and rises.

To assume that we are in the next leg of upturn the Sensex has to cross the immediate recent high of around 17460 and then hit the 18000 levels. Many analysts are predicting 18k as the target and hence we may see profit booking at those levels. A decisive close above 18000 can aim for 19300 – 20200 on the Sensex may be by same time next year. The near term supports come at 16200 and 15600 where in we expect buying to resume if there are any corrections. Correction and Recoveries until things are clear on the economic front would remain to be sharp like before.

Disclosure:- It is safe to assume that the author may have interest in the sectors recommended in this news letter. Seeking personal advice from your Financial Advisor is recommended before acting on any of the substance given herein. The numbers, figures, etc., presented may have been taken from various sources.

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