Hold on to current portfolios
With multiple negative factors ruling, markets are likelyA to go further down initially during the week After witnessing a five week-long rally,...
With multiple negative factors ruling, markets are likelyA to go further down initially during the week After witnessing a five week-long rally, the Indian stock markets had taken a short break in the previous week and closed lower than the preceding week. However, the markets resumed their upward movement last week and gained as many as 511 points in the first four trading days ended on Thursday. On Friday, the last trading day of the week and the first day for entering the futures and options contracts for the month of June, the markets plunged 455 points mainly due to a fall in the value of the rupee against the leading international currencies, especially the dollar and, also a further drop in the GDP numbers as announced on that day. In spite of the huge 455 points loss, the BSE Sensex ended last week in positive territory, though the gain was a marginal 56 points. Thus, after a brief lull, the rallying mood of the BSE Sensex was maintained. Barring the two major market indices and a few selectA scrips, the markets were marked down significantly with market men fearing a further fall in the new week in absence of any good news. Last week commenced on a cautious optimism and the BSE Sensex recaptured the 20k mark level that it had lost just a week before and scaled to the week's peak of 20254 by Thursday. The four day-long rally was led by Reliance Industries which turned bullish after the company made announcement that it found huge deposits of gas in KG-D6 block allotted to it. However, in the first four trading days when the Sensex and a few other sectoral and segmental indices had been on the climb, a majority of the traded scrips were still on a losing ground and closing were mostly in favour of the sellers of equities. Such behaviour of the markets in which the indices going up and a majority of the individual stocks losing ground every successive day appeared to be somewhat strange but indicative of a possibility that all was not well. And certainly, all was not well at all. The rupee had been going down nearly unabatedly and fell to an eleven month low. The GDP numbers also disappointed markets. The overseas stock markets also sent a negative message to the Indian stock investors as most of the European and the East AsianA Stock exchanges took modest to severe knocks due to various factors. Incidentally, as per the government directive, many companies having promoters' stake of more than 75 per cent were the other major ruiners as these companies have very short time left to meet the government directive to off-load excess of 75 per cent of promoters' holdings. The sustained fall of the rupee has not only caused the stock markets a drastic fall but also impacted the current account deficit (CAD). It has caused imports to be costlier and the oil marketing companies to increase selling prices of petrol and diesel with immediate effect. The vegetable and milk prices have gone up in the last few days and the increase in the fuel prices would add fuel to the fire and the inflation would again go up making it difficult for the Reserve Bank of India to cut interest rate in the next monetary policy review meeting. So, the markets have been besieged by multiple negative factors and therefore most likely to go further down, at least in the initial trading sessions of the new week. However, with the monsoon being just a few days away from now, they are unlikely to fall much in the days to come and solicit support at around last week's lows. It is therefore advisable for the long term investors to not buy afresh but certainly hold on to their portfolios for some more time.
9 Dec 2019 12:12 PM GMT