Relief likely only after mid-July
Invest in stocks which have potential to go up once bullish trend returns It turned out to be a week of destruction for the stock markets globally....
Invest in stocks which have potential to go up once bullish trend returns It turned out to be a week of destruction for the stock markets globally. Major factor that contributed for this downfall was strong US dollar which strengthened against most of global currencies. However, the Indian currency and the domestic stock markets were the worst hit among the peers as the problems faced by Indian economy are more acute. The denial of interest rate cut by the RBI also played significant role as markets could not resist the selling pressure from foreign institutional investors (FIIs), who, for the first time after a long term of buying spree, turned frantic sellers for the past couple of weeks. When the markets resumed trading for the new week on Monday morning, the opening levels were comparable to the closing levels of previous week. Once RBI dashed rate cut hopes and maintained status quo in the policy review meeting on that day, markets fell headlong. But the negative sentiment did not last long and so, markets recovered soon after and ended the day with 148 points on the positive side thanks to the reports that indicated good progress of monsoon. News that US Federal Reserve would send positive vibes during its policy review also added momentum to the positive trajectory. However, the Fed did not react on expected lines. Instead, the apex bank of the US made it clear that stimulus measures would be eased as the North American country's economy was gradually improving. This announcement strengthened US dollar against all leading currencies and the Indian rupee was the worst hit because the country had already been facing an incremental problem of widening current account deficit (CAD). The rupee fell to an all-time new low of 59.99 during intraday trade on Thursday that caused havoc not only in the stock markets but also in the bullion market. Interestingly, most of the leading global bourses including those of the US were hit by the firming up dollar, with Indian ones being the worst hit that day which saw the BSE Sensex shedding 526 points in just one day's trade. Since the markets were up by 148 points on Monday and they recovered by yet another 55 points on Friday, the net weekly loss was 404 points. The last week's loss of 404 points though appears nominal left huge impact non-Sensex scrips and even large investors including high networth individuals (HNIs) also incurred losses. The fear psychology has engulfed the minds of the market men as the end of the futures and options monthly contract was fast approaching. In view of this, markets may not go up significantly even if rupee becomes more stable against the dollar. However, the last week's slump had helped the markets bottom out. Also, the sell-off in the last week has provided a rare opportunity for buying those shares which have potential to go up first when the bullish trend returns. Since the monsoon is good thus far, it is expected to be so all throughout and therefore, the customary or traditional seasonal buoyancy is expected to return from the usual schedule, mid-July, which if not hampered by factors that can destroy it, would last for three months or more. Besides, Indian government has also started acting on economic reforms front and taking steps that could be expected to help the economy revive. The fall in the rupee value is arrested by steps taken by the RBI. D Subbarao, the apex bank's chief, while announcing the outcome of the review meet on last Monday has said that if the inflation is down and remains under control, he would certainly consider a rate cut in July-end review. Thus the worst seems to have been fully discounted when the markets fell headlong last week and what is expected to prevail is a gradual recovery. It is, therefore, recommended that investors must not miss the opportunity to buy if the markets continue to offer discounts in shelf prices.
5 Dec 2019 2:57 PM GMT