by Vivek Karwa, CPFA., CFPCM
140213: The year 2014 has started with substantial amount of volatility. The market which was going strong till the end of 2013 saw a good correction as we began 2014. We saw the rally coming in post the results of the four assembly state elections, the mood turned positive since the results were in line with the projections and the market expects a similar show during the 2014 lok sabha elections. The market is betting for a change and if the change comes in with strong numbers, the market will be inclined to perform better.
The resent sell off has come on account of US federal reserve reducing its bond purchases program and hence leading to lesser infusion of funds into the US economy, popularly known as the FED Tapering Program. There are both positive and negative aspects to it.
The negative reasons which the market participants are giving is that, since the infusion of money will reduce the spending abilities, the economy may not recover at the same pace as the spenders will become cautious. This will lead to consolidation to negative growth and hence market are reflecting the same.
We feel there are more positives to the move. The biggest positive being that FED is now finally confident that US economy is recovering. The FII’s have been selling continuously in emerging markets like India since they would prefer investing in safer “recovering” economies like the US than to take risks at other paces.
The reason is also due to the reasons of our own internal issues. The government is just not able to take decisions on any important matters, leave alone the important matters, there are no decisions on any small matters either. Everybody is involved in some kind of shadow boxing and there is no one to control such feuds.
To make the matters worse for the corporate India and the foreign direct investors, the continuous harassment by the income tax department due to unclear rules is creating all the havoc. It is unethical on the art of the government to change rules as per the tax amounts they want to collect. Who will come and invest in the country when you know that they may modify the rules to snatch away more money from you in order to bridge the fiscal deficit gap they have created, due to their own mis-managements.
Anyways, these things may become a history soon. If we get government as per the common perception of people and as per the projections made by government, the markets may be headed for a major rally. Stocks from the Banking, Infrastructure and capital goods have suffered the most in the current regime.
A strong change at the centre may give a booster injection to the stock prices across the board. Our immediate target of 22000-22500 on Sensex still remains a doable figure. May be by May-June’2014.
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.
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