Tamilnadu Investors Association – Investors Digest.
by Vivek Karwa, CFPCM
101117: In the previous writing we had mentioned that if markets have to see a correction, the same could be a “V” shaped one. We infact are witnessing the fast half of the V with a fall of more than 1000 points on the Sensex since Diwali till today i.e. 17/11/10. Market wanted a reason to correct and many reasons have erupted suddenly like a buffet this time.
China is causing the biggest worry and the Sovereign debt crisis of Ireland is once again haunting the markets. As if these were not enough we saw a dismal IIP number this time coupled with the political drama over the 2G scam at the centre and the latest is the estimated hole of around 14000 Crs in LIC and LIC MF’s balance sheet which is now being compared with the UTI mess which we saw few years back.
Considering so many factors it is no surprise that we have fallen 1140 points from Diwali close of 21005 to 19865 which is now being predicted to fall further as of today. Time will only tell where we are by the time this issue is in your hands. The positive factor is that the much needed correction has finally happened and this will only help our markets to move more decisively in future.
The Indian markets have been driven by the FII flows and thus selling by them will definitely have its own effect in case of reverse flows which we have witnessed recently. This time the domestic institutions have turned out to be buyers as there is nothing big to worry in India and hence if China slows down, India will find more acceptances with the investors as at some point of time India has to overtake China in growth numbers. Thus short term may be looking worrisome but over a period of time things would be normal and this is not the first time we are seeing a crisis!
Indian investors are waiting with cash and hence dips may be used by them to do a staggered buying. After Coal India IPO and the PowerGrid FPO there are more number of first time investors who have started looking at the stock markets. This is a sign of a progress towards maturity which is the aim of the regulator, investor associations and also stock exchanges.
The European problem will again settle at some point of time. In fact Greece recently sold a large bond issue which found buyers. We expect that the EU in the interest of the whole region would not allow any country, simply collapse, and measures would be taken to arrest the deteriorating situation. China has to slow at some point of time and the pressure about Yuan valuations will some point of time will have its own effect.
The dismal IIP numbers recently posted should be a aberration only considering the fact that we has a great monsoon in that period followed by the festival Diwali and it can easily be assumed that industries may not have worked full fledge during the period. There was lot of hype in the media that Infra sector showed the worst IIP number. How can Infra projects be built during rains? It’s a question to ask ourselves and cut down the hype.
We remain bulling on the Infra sector with a long term view. Power sector also remains a sector which will see lot of action in the coming years, and if these two sectors have to do well then an investor cannot ignore the banking sector. The valuations between the large banks and their immediate peers is wide and hence corrections can be used by investor to pick and choose such mispricing in the market.
We see the worst case scenario for Sensex at 17800. No one can time the market and hence keep buying at every dip.
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.