Long-term bullish trend intact

Long-term bullish trend intact
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Highlights

Long-term bullish trend intact.The stock markets, though saw a third consecutive weekly fall, breathed a sigh of relief as the sustained downtrend for the preceding seven days straight came to an end when the BSE Sensex closed higher by a point on Friday.

Recent market fall is a technical correction; Investors may pick up quality stocks from private banking space

The stock markets, though saw a third consecutive weekly fall, breathed a sigh of relief as the sustained downtrend for the preceding seven days straight came to an end when the BSE Sensex closed higher by a point on Friday. Still, the markets were down in the third consecutive week and lost as many as 802 points when compared with the previous week's closing. The net loss suffered by the Sensex from its life-time high of 30025 on March 4, to its last week's closing of 27459, stood at 2566 points in 16 trading sessions.

Besides it being the last week of March derivative contracts, the financial year-end considerations and sad events that took place outside India were the other major factors that compelled the markets to continue their descend. However, since the fiscal year has ended in the last week and new derivative contracts for April have commenced on Friday, it would now be a news-driven market from the new week onwards. The geo-political unrest in Yemen and other Gulf countries that coincided with the end of account considerations on Thursday affected the market sentiments. But they would cease to be effective any longer as the same has already been more than reflected in stock prices on Thursday when they fell head-long.

The near term future trend of the markets would be governed by upcoming events like Reserve Bank of India's monetary policy meeting scheduled to be held on April 7 and the year's most important corporate number season besides the developments in the second part of the Parliament's budget session. With the Union Finance Minister Arun Jaitley in favour of cheaper finance and efforts on to clip RBI powers, the apex bank chief has no alternative except going for another rate cut. Therefore, it is very likely that RBI Governor Raghuram Rajan will go for a small cut of 25 basis points in repo rate on April 7, or at least take steps to cut CRR or SLR so that the banks can offer cheaper finance to borrowers.

The new corporate number season beginning from second week of April is also expected to provide a cushion to the falling market though the corporate numbers are not expected to be very exciting for the quarter ended March 31. Also, the Government of India is firm in introducing economic reforms. It decided to re-introduce the land reforms bill that is going to expire on April 5, with, however, more amendments so as to get it passed in the upper house. The government coffers became richer in the last few weeks with auctions of coal mines and telecom spectrum. It is also planning to divest from few more public sector companies in the next few weeks.

The government also cut natural gas prices that might be harmful to a few corporates but would provide a huge relief to the consumers like power generation companies and others. It also spared upstream oil companies from bearing the burden of subsidies in the last quarter ending March which would work highly positive on their balance-sheets and thereby inspire investors to rush for buying their stocks. Thus, though the recent fall being severe and a very wide amongst counters was nothing but a technical one and there is nothing wrong fundamentally. This also means that since the fall being a technical one, would soon get over and the markets could be expected to return to their primary uptrend in the next few weeks.

However, the likely rise in the markets might not be very big in the wake of untimely rains and crop failures in many parts of the country as the affected farmers would need to be financially compensated resulting in erosion of the fund sources of the exchequer and also other schemes that need to be implemented compulsorily but the same would provide real long term investors an opportunity to buy shares of their choice at lower prices. Since the long-term trend still appears to be bullish investors may pick up quality stocks from private banking space that have already fallen significantly in the recent weeks' market fall. The fundamentally sound pharma and automobile companies stocks are also recommended for buying for long-term investment.

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