Long-term bullish trend intact

Investors can focus on shares of pharma, banking, infra IT companies for long-term investments

After losing 464 points in the previous week in the aftermath of the Supreme Court cancelling coal block allocations en masse, the BSE Sensex did not get any relief last week as the Reserve Bank of India maintained status quo on interest rates. It was a truncated trading though with markets remaining closed on Thursday on account of Gandhi Jayanti, and Friday due to Dussehra. With Monday (today) also being a holiday on account of Bakri-Id, markets got a rare period of five consecutive holidays. Therefore, the week under the review had only three working days, a factor that normally hurts market sentiments.

However, the last week's net loss of 38 points by the BSE Sensex was caused by altogether different reasons. The RBI kept benchmark interest rates and ratios unchanged at its monetary policy review meeting on Tuesday. This, however, was very much as per the market expectations. But when the Apex bank signalled that next rate-cut was unlikely before end-2015, if at all, the market men turned bearish and off-loaded their long positions that they had built up in large cap and forward group of equities. Showing small changes on each of the three trading sessions, the Sensex ended the week with a small loss of 38 points thus making this a straight second week of loss. The much hyped US visit of the Prime Minister Narendra Modi failed to provide even a slightest relief to the down-going markets. Moreover, news pertaining to more stock market related issues like Purchase Managers Index (PMI) and passenger vehicles sales did not turn out to be highly supportive to the uptrend as the value of the Indian currency further eroded against the foreign ones, especially the US dollar. The foreign exchange reserves position and current account deficit numbers too turned out to be negatives for the markets.

Thus, the markets continued to rule weak on the eve of arrival of October, a month that is not considered to be very auspicious for the global stock markets including those of India. However, the short-term trend has certainly turned negative due to the wide-scaled fall in stock prices in the last couple of weeks, the medium-term and the long-term trends have continued to be bullish and therefore, once the impact of the local and short-duration negative factors get over, the markets might once again zoom up. A trigger might be provided by Infosys Technologies when it comes out with second quarter results on October 10 as the company, after new CEO Sikka taking over the affairs, has been fast progressing. The fall in the rupee value and revival of the US economy are yet more positive factors that could help the management of this IT major showing more confidence in forecasting future guidelines.

Usually, the new corporate season kick-starts with Infosys coming out with its quarterly performance followed by other leading information technology companies like TCS and Wipro. As this time all the three majors are expected to cheer up the markets, there is a possibility that a fresh wave of buoyancy is triggered from October 10. The Maharashtra and Haryana assembly election results that are expected to come out just a week before Diwali festival could make the markets more vibrant and investors more jubilant this time irrespective of October still being there. It is likely that BJP will have an upper hand in both the leading states, Maharashtra and Haryana, this time.

Thus the markets, though have gone down in the last couple of weeks due to short-term factors, have not turned primarily bearish and are most likely to go up in the long-term as according to many stock market experts, this is just a beginning of a major multi-year bull market. Those investors who have missed out the opportunity to buy before the current boom begun from August, 2013, can certainly enter now for the next phase of a bigger bull market but in doing so, they will have to be more choosy and more patient as with prices having gone up too much from their August, 2013, bottoms, the risks have also increased. The long-term investors could select shares from pharma, banking, infrastructure and IT sectors that have long-term futures.