Tamilnadu Investors Association – Investors Digest. by Vivek Karwa, CFPCM
100916: Decision making to deploy the money in the market is becoming more and more difficult for the investors. Many just stayed away holding cash during the period global markets were correcting, in anticipation that India would also follow. Good news is that Sensex & Nifty have finally breached the lower range of the year end target of 19300 – 20200 & 5760 – 6070 respectively which we have been mentioning since Jan’10 but the irony is that the usual euphoria is totally missing and hence though the indices have run up, the returns on the portfolio’s are just missing. The rally has been very selective amongst the large cap companies and there are many companies outside the indexes which are still far away from the all time highs!
The positive developments and improvement in the global markets started after the DOW took extremely good support at the 9915 levels and then was supported by the above expected jobs data figures. Further bond sale by one of the PIIGS country saw a huge demand and that boosted the confidence that these economies may now be out of the woods totally. The inflation also is likely to rise in some of these economies which may also be a signal that the period of deflation atleast may be over.
Inflation continues to be a worry as usual in India also and thus we saw another hike in repo and reverse repo rates. The RBI will now have to decide and take a serious call since these rate hikes may finally take a hit on our GDP growth. India will lose her competitive edge against China if there is any pressure on the growth. India is likely to even surpass Chinese growth in next few years and that’s the reason we can expect huge capital inflows in the form of FDI and FII investments in the market.
US president is finally walking the talk! His one of the election campaign was to take all kind of measures which do not allow US companies to outsource jobs to other countries, particularly India. The recent developments in US do not auger well for the IT companies. The IT companies which have focus on Europe, Asia and India may not see much hit. How serious is the administration there has still to be seen, are these measure just a political makeup due to local polls in the US? Or will these continue later also only time will tell.
Indian economy continues to look on a strong footing and that’s the reason more than 3500 crs FII money came into the market in just matter of ten days. The market is liquidity driven and hence one should not fight the trend by going short. The liquidity can take Sensex till our upper range of the target i.e. 20200 where a good profit booking or atleast cautiousness even from the foreigners may be exercised. So what can help break 20200 levels?
The advance tax numbers announced show that the performance of the corporate is likely to be strong in the coming quarters also. September end would be results season also and hence if the signal from the advance tax is to be true then we may have to upgrade the Sensex EPS and hence even 20200 may be taken off and we may start testing the all time high 21207. The targets after 21207 shall be discussed in future since it would be premature to do that right now.
So what should an investor do who is feeling left out in the rally? Especially when 20200 could be a great profit booking area! Investors can follow the concept of systematic investment wherein a portion of the capital say 10 – 15% could be used to buy stocks every month. An Investor can choose few companies and then divide the monthly investible surplus every month to buy these stocks. Demat facility allows buying even single stock and hence disciplined investing at these levels of market would ensure best possible returns and safety.
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 Management Committee Member of TIA but the views mentioned are of his own and not necessarily that of TIA.