Few Words on Market…

Tamilnadu Investors Association – TIA, by Vivek Karwa, CFPCM

160719: The previous month we had mentioned… “We see Sensex facing next major resistance at 18100 levels” The index hit high of around 18167 then has seen little profit booking, ending the almost stable rise we witnessed over the month. Lately it has been trading in a tight range and has not corrected much in spite of corrections in other global market. Thus Indian markets have outperformed during the month when compared to other major global markets.

One major factor market is looking at is the shift in the attitude of the government policy towards fuel prices. De-regulation of fuel prices has always been a contagious issue and a political issue as well. Though partial, a right step has been taken with deregulating the petrol first. No doubts the move is definitely going to affect the aam aadmi badly in the present inflationary scenario, for which the government should take steps in reducing the prices by reducing the taxes. Fuel prices are set to high taxes in India. The government should not subsidies the fuel for public’s private conveyance and at the same time a cushion can be granted by reducing the excise duties.

India is being looked on by the world, hence this step in policy change has sent some positive signals to global investors. On one hand government has been loosing by way of subsidies and on other hand India has seen double digit growth in fuel demand over the year which has sent cautionary signals to the administration. We can easily guess the increasing demand just by seeing the automobile sales figures!

International Monetary Fund (IMF) has recently predicted that India would grow at 9.4% in the year 2010 and the Dec’2010 GDP growth would be at 10.3% which would be much higher than the growth of China itself, and finally the growth would settle down at 8.5% in 2011. We have been regularly mentioning here that India will at some point of time overtake China and feel the time is very near. In yet another report it has been predicted that India would continue growing at 6.5% atleast for next 40 years. These figures are just attracting buyers into the market regularly.

Thus on every small correction we witness buying and though global markets corrected, Indian markets outperformed by not falling as much due to fundamental support. Though everything looks positive we are trading almost at fair value and hence it would be healthy if some profit booking can come in. The global markets have started to look cheap after Indian outperformance.

Though our year end targets on Sensex at 19300-20200 and on Nifty at 5760-6070 remains intact, we feel both the indexes should find stiff resistances at 18360-18600 and 5480-5555 on Sensex and Nifty respectively. Thus booking some profit at that range and sitting on some cash would be advised. If the rally continues we don’t get affected much but if a correction comes in we do make actual loss.

Some other factors which are to be watched out are monsoon and the results. Monsoon started well and then went into deficit zone and has once again picked up. Better monsoon will be a positive factor for many sectors including the cement and fertilizers which otherwise have been underperforming, especially cement.

Results have just started to come out and have been favourable and above expectations till date. Reports suggest that investments by corporate India have come down by almost Rs.50000/- crores. The reasons could be lack of confidence and sentiment, confusing signals from the US and Europe region and hence no compulsion the expand capacities for now etc. Keep a watch on the Infra sector which after 2007 has been neglected by the market.

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.

Vivek Karwa is a Committee member of TIA, Views expressed here are his own and may not be that of TIA.

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