Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Sensex falls 15.8% in 12 trading sessions - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 2, 1999

    Sensex falls 15.8% in 12 trading sessions

    The 30 share BSE Sensitive Index has registered a fall of 15.8% over the last twelve trading sessions. The fall assumes significance as it comes in the wake of an improvement in the domestic politico-economic scenario. Here we take a look at both sides of the coin and try to find justification for the recent bear hammering.

    Reasons to Buy:

    • The formation of a relatively stable central government
    • Moody's upgradation of India's rating outlook
    • Pick up in economic activity-cement, automobiles and steel have recorded sharp gains in volume sales
    • The recent barrage of reforms initiated by the new government and the prospects of more such measures being taken in the coming weeks
    • The 30 share BSE Sensitive Index trades at a price/earnings (p/e) multiple of approximately 15, while the S&P 500 (US) trades at a p/e of 33. Thus, valuations are relatively more attractive on the Indian bourses.

    Reasons not to Buy:

    • The key concern currently pertains to the Y2K problem. The concern arises from two aspects first, given India's non-preparedness there is a possibility of breakdowns in various sectors. Secondly, software companies, that have contributed in a significant way to the stock market rally, are likely to witness a slowdown in earnings as revenues from Y2K related projects decline and customers delay implementation of new projects.
    • On the 12th of October the carry forward (only long) positions stood at a whopping Rs 38 bn. Thus a large part of the rally was fuelled by purchases on margin. The figure now stands reduced to Rs 28 bn. However, it must be noted that these figures are officially declared and in all probability the actual long positions are likely to be much higher.
    • The fiscal position of the central government continues to be a cause of concern. The government has already incurred a fiscal deficit that was equivalent to 60 % of the annual limit by the 30th of September (half year).
    • India has recorded its eleventh successful monsoon this year. However, the distribution has been skewed and this has raised concerns regarding the summer crop output. A slowdown in agricultural production could postpone economic recovery.
    • A lot of retail funds have been deployed in the IPO market, and this has dried up the flow of fresh funds into the markets. Moreover, a lot of funds and investors have been accumulating funds to invest in the offerings of public sector enterprises.
    • FII buying has come to a halt and infact October has witnessed a net outflow of funds. This is mainly due redemption pressure being faced by the foreign funds.

    The reasons to support either the bullish or the bearish mood are many. However, the key factor that has been responsible for the recent slide has been the absence of FII (foreign institutional investor) buying support. This has caught the market (momentum investors) in a situation where the momentum investors have been left holding huge outstanding positions. Whether the markets will witness a turnaround to reflect the improved politico-economic situation is yet to be seen. Until then, technical factors like carry forward positions, badla rate et cetera will continue to have a significant impact on the performance of the markets.



    Equitymaster requests your view! Post a comment on "Sensex falls 15.8% in 12 trading sessions". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms