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Stockmarkets: After the bloodbath... - Views on News from Equitymaster
 
 
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  • Jul 25, 2000

    Stockmarkets: After the bloodbath...

    The markets have been through what is probably one of its worst sell offs in recent times. The trigger for the sell off probably was the unexpected rate hike announced by the Reserve Bank. But have the markets over reacted?

    Probably not is the first reaction. As we have often pointed out over the last month, there are four players in the market - the FIIs, mutual funds, momentum investors and lastly the retail investor. The first of these three groups are of the trend setting type. The retail investors are only meant to follow suit. So, in the last 30 - 45 days we have witnessed that FIIs, mutual funds and momentum inventors (who joined in later) have been large net sellers in the markets. The RBI's rate hike was only a trigger, which led to the markets absorbing recent developments.

    Let's step back a moment and look at what the fundamentals have to say. The Indian economy is chugging along fine and this is largely evident from the buoyant demand for steel and cement (core sectors). Exports have grown over 30% in May, the latest available figures. Inflation seems to have stabilized at around 6% (finally!). And lastly, the key factor, earnings growth has not failed to disappoint in a large number of cases. Fundamentally we are sound (an expected petrol/diesel price hike could have some adverse effects, but nothing major).

    One needs to make a call whether the markets have discounted all the news that is floating around. If yes, then time to go bargain hunting. A number of stocks are trading at levels near to the lows recorded in 1998. But if you think that the markets are going to decline further, gather your resources so that you get the best picks at the best price!

     

     

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