Few Words on Market…

Tamilnadu Investors’ Association – Investors Digest

by Vivek Karwa, CFPCM

110217: In our previous month article we had predicted the index levels both with a fundamental view and technical view. The technical view read as… “Technically we feel a range of 23200 – 24600 can be possible in 2011. The first support for the index comes in the range of 18800 – 18600 and if these levels are not held on by the market then the second support is in the range of 17300 – 17000”

January was a bad start of the year for the market and in panic the index touched 17295.6 exactly within the mentioned second level support of 17300-17000 and has bounced back and is trading above 18500 today. During the same period global markets led by US have been doing fairly well. Dow has breached the minor resistance level of 12000-12200 and heading to test the bigger resistance at 12680-13230.

Dec-Jan has seen lot of outflow from FII side on back of various negative news flows. The issues on corporate governance also have surfaced with SEBI hitting the nail on various companies involved in rigging their own shares. Such actions by the market regulator should be construed as positive for the long term since promoters will always think many times before taking the gullible shareholders for a ride.

The valuations at 21000 where definitely higher and the negative developments from the administration side gave a solid reason for the market to correct. Market has seen reverse flow of money into developed economies which the Dow movement clearly points to. FII’s may have stayed on in India as we are possibly the fastest growing economy in the world in spite of the problems the country is witnessing. Negative news drove away the money.

Market is even now watching the developments on the investigations being carried on by CBI where a new corporate leader is almost summoned by the day! Investors should stay away from such companies until and otherwise they are good enough at taking risk being contrarian. Every negative development will have a good ending and we feel this time also these exposes will bring in more transparency over the longer term.

We are chugging towards the budget session of the parliament and the budget itself. Market will watch the budget very closely as it comes at time of many uncertainties and the widening fiscal gap. Don’t expect any big bang announcements on major policy decisions but expect lot of populist decisions which will make the voters smile across almost a dozen states which will go for polls in this year.

Middle class can expect a tax free slab of up to Rs.2 Lac earnings which is the broad consensus among the market participants. We hope government tries to put in policies which will create more employment opportunities. If the government wants the country to grow at a pace of 9% plus GDP then a major thrust towards capital goods, road projects, ports, airports, land acquiring, oil & gas, etc., in the infrastructure space will be required.

The creation of a major infrastructure fund is still pending and positive moves in that direction may help companies engaged in long term financing of infra space. Shareholders of infra companies may not benefit to a large extent but selective approach in some companies can really create wealth for the investors over the next decade.

The crude has corrected after some stability in Egypt but is not expected to come down drastically hence let’s see what approach is taken towards the subsidy system in the country. The world cup may keep the hotel stocks in focus in the short term. The Sensex may see a small resistance at 18800-19000 levels.

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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