Buy mid; cap stock

Long-term trend is bullish, market gets affect with trivial issues

Indian stock markets continued to rise, and notched 122 points' gain inspite of two major shockers – a denial of interest rate-cut by the banking regulator and a huge slump in net profit.

The pace of the markets going up was restricted mainly because RBI in its monetary policy review last week disappointed the borrowers and investors whereas the quarterly working results of BHEL showed a huge slump in net profit.

However, the markets did not close in the minus mainly due to re-entry of FIIs for buying and also maiden entry of EPFO funds from August 6 onwards, into the Indian equities.

The near assurance as provided by the RBI governor Raghuram Rajan of a rate cut in September 29 meeting helped the benchmark indices to close up than the previous week's closing.

The BSE Sensex on Monday surged over 100 points in intra-day trade, paying little heed to weakness across major Asian markets. Banking stocks witnessed buying spree. In fact, gains in Sensex were primarily led by lenders such as ICICI Bank, SBI and Axis Bank.

Index heavyweights such as ITC and Tata Motors too contributed to the up move. BSE's mid-cap and small-cap indices hit 52-week high as buying in those segment scrip was more.

On the other hand, US stocks were down on the first trading in August as oil prices touched six-month low and data showed US economy lost some momentum at the end of the second quarter.

On Tuesday, the markets ended four day winning streak on profit-taking post RBI announced its current year's third bi-monthly policy review in which the banking regulator did not make any changes in the rates and ratios including repo rate.

Overall it was a volatile session for the market as the Sensex plunged more than 300 points intraday following Infosys, RIL, ITC, HDFC twins that dragged the markets but select banks and metals and mining stocks got timely support.

On Wednesday, however, the market rebound smartly as bulls took control of Street with benchmark indices raising more than half a per cent led by technology stocks. Positive comments by RBI governor, a day after the monetary policy review also fired up the markets.

IT stocks lent good support to the markets led by euphoria around Cognizant's April-June quarter results. According to a report published by a private foreign bank, overseas investments into Indian equities turned positive at $882 million in July, after three months of continuous out-flows. The markets therefore jumped by 152 points on Wednesday.

Fag-end buying in blue chip stocks helped the BSE Sensex on Thursday to settle in an otherwise listless day up 75 points at 28298. The gains on benchmark indices were led by index heavy-weights such as Larsen, HDFC, SBI and TCS.

Markets ended Thursday's session with marginal gains led by strong rally in pharma stocks with Dr. Reddy's Labs stealing the show. L&T also added to the gains on reports that it sought shareholders' nod to raise up to $600 million through issuing securities.

On Friday, the Sensex closed with a loss of 62 points as investors felt that the economic reforms agenda may be delayed as the adamant opposition parties led by the Congress did not relent in their stance of disrupting the Parliament.

Although the long-term primary trend continues to be bullish, the markets are most likely to remain more prone to trivial issues affecting the economy only insignificantly. Investors therefore should concentrate on buying mid-cap stocks as these are priced lower than blue-chips and also hold tremendous potential to appreciate in a bull market over a period of time.