Few Words on Market…

Tamilnadu Investors Association – Investors Digest.

by Vivek Karwa, CFPCM

101015: We have witnessed a very eventful month with Sensex finally breaking the upper range of our target 20200 which we have mentioning since January’10 in our writings. The coming month also should be eventful due the festival season and to see if market also shares the same joy and breaches the all time high 21207 before Diwali. As of now its hovering around 20200 levels, though broken is also witnessing some pressures.

The sole reason for this rally has been due to continues FII inflow into the market. Recently the FII investment’s in Indian market has crossed Rs. One lac crore! The figures clearly reflect the sentiments of the world towards Indian economy. With growth still zero to marginal in rest of the world the money is finding it’s way to growth areas like our country.

As mentioned last month the index’s may be showing strength but the overall market consisting of the mid-caps and the small-caps still have to catch up with the overall trend. Some signs of them catching up are visible now but still it’s into very selective stocks and hence though the market has been up the portfolio’s of the investors are still not showing the same kind of gains.

Thus the anticipated correction by all market participants is just not coming. Even if it happens, the correction in small and mid cap stocks may not be that severe as they have not rallied either. The biggest nightmare of mutual fund investors has been that though FII’s have been buying, the domestic institutional figures show that they have been consistently selling and hence the portfolios again are loaded with cash waiting for the correction which is just not coming (though some tiredness is visible). We all know market would never behave the way we expect! Else making money would be so simple!

Investors need to be very specific while buying at this point of time. Since lot of money is waiting on the sidelines to enter the market the corrections may be short lived. Any correction in a fierce bull market is violent and vicious and we have been seeing this practically in our investing experience, and generally violent corrections are supported by the investors waiting to invest and thus the recoveries are also very fast. Thus one has to always be very vigil in the present market as “V” shaped corrections and recoveries are part and parcel of any bull market.

Hence when will the said correction happen? No one can answer that. Market generally have the tendency to pull everyone into and then correct, pull even the investors waiting on the sidelines as at some point of time they would start getting the left out feeling and then commit money!

The IMF has further revised the GDP growth forecast. This has gone well with the sentiments. The latest IIP numbers have been bad, but we feel this should again be a temporary phenomenon and hence an uptick may soon come again. Inflation remains cause for worry and now it looks certain that RBI may raise the rates yet again.

We are into the results season again. The companies which have declared results till now are in line with expectations. If the results continue to be strong and the corporate noise is on the positive side then there might not be any drying in liquidity, thus keeping the sentiments positive. Volatility can emerge at any point of time but that would not be a cause for worry if we have invested selectively in stocks which still have to perform.

The exchanges are starting the “Call-Auction” process from 18/10/10 which would benefit the small investors as the same would bring down the opening price volatility. The system was earlier there then withdrawn and the need has been again felt to re-introduce it.

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.

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