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Long-term bullish trend intact
Even after a fall of 499 points on Friday last week and a weekly loss of 96 points, the BSE Sensex gained 1684 points in 21 trading sessions with an average of 80 points per day in January, the first month of 2015.
Sensex may fall below 29k if RBI maintains status quo on lending rates on Tuesday
Even after a fall of 499 points on Friday last week and a weekly loss of 96 points, the BSE Sensex gained 1684 points in 21 trading sessions with an average of 80 points per day in January, the first month of 2015. The last day's fall which pulled down the benchmark index from its life-time high of 29844 reached in early trades on that day to the session's low of 29070 was attributed to profit-booking. So, its impact might continue to be felt when the markets reopen today for the new week.
However, a change may occur on Tuesday but only if the Reserve Bank comes out with yet another cut in interest rate when its board meets to review monetary policy. The central bank unexpectedly announced a 25 basis points' cut in repo rate on January 18. In case, the RBI chief prefers not to change the lending rates on Tuesday, then the markets might go further down and plunge below 29,000 at once. In case the RBI goes for further cut of 25 basis points this time too, then markets are unlikely to rise above the life-time high of 29844 as the sentiments have been grievously hurt due to the last day's huge and widespread fall. The markets can be expected to go up above the life-time high only if the RBI cuts repo rate by more than 25 basis points and also opens up flood gates to enhance liquidity by way of slashing CRR or SLR or both. The only reason behind presenting such pessimistic picture lies in the dull Q3 corporate number season. The Q3 corporate numbers, in general, have not been exciting so far as most of the leading companies have performed either poorly than the previous comparable numbers or at the most, showed only slight improvement barring a few exceptional ones.
It was an eventful week otherwise. The US President Barack Obama who was chief guest for the Republic Day on Monday last week also held worthy dialogue with the Indian Government over broader issues.
However, the net outcome of his three-day visit did not excite the markets due to lack of fruitful pacts that could help the Indian economy soon. The markets remained closed on Monday on account of the Republic Day and Thursday being the last day for derivative trades most of the traders and investors stayed away from buying afresh. The FIIs, however, mopped up stocks in large quantities till Thursday. On Friday, the opening day for new derivative contracts for February series, the markets registered a life-time high of 29844 in the initial trades, but later the banking sector stocks started to lose quickly as some banks announced lower net profit numbers. At the close, Sensex shed 499 points, ending a 10-day gaining streak.
Though selling in the nature of profit-taking alone sliced off as many as 499 points in just a single session on Friday, it is certainly not a good sign for the markets as this indicates that the markets had been in heavily overbought positions. The bull operators, who smelled financial crunch with domestic institutional investors like LIC and others pumping in huge funds in Coal India's issue worth over Rs 22600 crore, also off-loaded their stocks.
However, still, the long-term primary phase continues to be bullish and the markets are unlikely to drop significantly down and remain depressed for long as the Budget this year is also expected to be bullish. Therefore, the long-term investors are advised to pick up shares of the companies that have announced satisfactory or good working results for the quarter ended December.
Of such companies, preference must be given to leading ones as they would be the ones to withstand against any unexpected negative events in future. Those who dare to invest in low priced stocks can also go ahead and pick up shares of companies which have been listed since long and still not gone into liquidation but while buying such scrips, they must keep one point in mind that these would the ones to be off-loaded at right time which means when prices went up, and not keep them for long-term or even medium-term investment.
By: Talakshi Gosar
