Tuesday, January 3, 2012

D.St – At the Absolute Bottom?

3 January, 2011 – 20561 and now on 23 December, 2011 – 15738, that is our Sensex’s performance.
3 January, 2011 – 13454 and now on 23 December, 2011 – 9629, that is the Bankex’s fall.
The above mentioned data forces us to contemplate that has the Dalal Street reached close to its bottom, will it ever go deep down even further and even if it recovers then will it be able to last its surge for a period of time?
After a year which investors would definitely want to forget as index plummets almost 21% over its position earlier, the financial gurus are making comments that the markets are close to bottom but not out of woods yet. They still have a view that index would hover in and around the 16k and 17k mark. Though it is very difficult to indicate the mark on the exact bottom but through Price to Earnings ratio things become clearer.
Concerns about lower economic growth, policy paralysis, lack of investors’ confidence, burgeoning fiscal deficit, surging oil prices and lower industrial production clearly breaks the growing trajectory’s flow and rather retards the growth. And when Sensex and Dalal Street are the topics of discussion then sentiment plays pivotal role and with so many speed breakers sentiments are inevitably negative.
A report by ING Investment Management suggests that for FY12, fiscal deficit could rise to 5.7% of GDP as compared to 5.1% of GDP in FY11. Corporate earnings could slow down further, given the slower economic growth, which means there could be more downgrades from analysts in 2012.
And it is not only the domestic lack of growth which pulls the trajectory down but the global economic scenario which is glooming too plays a great role in this negativity. Be it USA or Europe, both being our largest exporters are severely hit by the downturn. This directly impacts our production system and indirectly our growth too. 1991 reforms if played a positive role in making our country a global contender of being a super power, then it also glued us with the direct impacts of the global negativity.
OPPORTUNITY- D St on the lowest level is also an opportunity for the investors for bottom fishing which gives them a chance to buy stocks which have fallen much below their actual level. These stocks are expected to bounce back as the time moves on and the markets improve, as this is the best strategy in the bear markets. Also investors can eye upon the beaten down sectors like automobiles and banking, which has the ability to come back sharply if the central bank cut rates in the upcoming quarters.
Since the markets are close to a bottom, it still opens a viable option to invest in for the future events. Now markets even when down offers opportunities, it’s the investors who need to smell the right one and keep the sentiment positive.

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