6,000: Reason to be bullish? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

6,000: Reason to be bullish?

Nov 23, 2004

Amidst all the global developments, much of which are not good news for any stock market across the globe, the Indian bourses have rather quietly (relative to the 2003 bull run) headed northwards, notwithstanding the correction over the last couple of days. In fact, a small faction of the market is already talking about (very much similar to the previous time) the Sensex vaulting the 7,000 levels! In this backdrop, we conducted a poll on our website with the intention of trying to gauge what you, the retail investor, feels about this leg of the rally. We asked whether at 6,000+ levels there was still a case to invest in equities. The audience feedback is mixed and a tad surprising considering that the indices have gained strongly in the last 2-3 months, that too without any significant positives. A majority (50%) of the audience believes that there is still a case for investing in equities at these levels, while almost a similar proportion (46%) thinks that it would not look to invest in equities. The rest have stayed undecided.

At the Sensex level of 5,400, we had conducted a poll asking our audience their views regarding equities. A majority (48%) had responded by saying that they would hold on to their investments and 25% of them said that they would buy further from the markets. The rest said that they would sell their holdings. The change in investor perception seen during the two Sensex levels of 5,400 and 6,000 indicate that investor perception is subject to sentiment prevailing in the markets.

The point we are trying to highlight here is the fact that, in a bullish environment, it is easy to get carried away by sentiment. From a majority of 75% (who would have either held their investments or sold part of all of it), currently 50% of the audience feels that they could invest further in the stock markets.

So what has led to this change in perception? For one, the overall bullishness being exhibited by the institutional investors (read FIIs) seems to be behind this new found bullishness. Of course, strong economic activity has been a major reason we believe that a considerable part of the activity seen on the bourses is due to sentiment rather than concrete fundamentals.

Considering that interest rates are likely to go up shortly, Indian corporates may be in for difficult times. Also, with very strong competition in almost all the sectors of the economy, corporates may not be in a position to pass on rising input and interest costs to their customers. This could impact their profitability going forward. While Indian companies are banking on high demand growth in the coming years, it is advisable to be cautious considering that India Inc. has faltered (the rush to add capacities between FY95 and FY98 led to a prolonged slowdown due to faulty demand projections) before on this account.

It must be noted that currently, the 'India story' is primarily that of growth and to a very small extent that of value (akin to 2003). Thus, while making fresh investments into equities, one has to keep in mind that the under-valuation in Indian equities no longer exists and hence, the investor must be content with the fact that he may not get the returns that were seen during 2003. On the contrary, if one were to invest in a stock expecting the growth story to pan out, then he would have to keep a long-term perspective in order to garner sufficient returns.

Equitymaster requests your view! Post a comment on "6,000: Reason to be bullish?". Click here!

  

More Views on News

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

ONGC to NMDC: Here are 5 Stocks Value Investors Should Closely Track (Views On News)

Nov 26, 2021

Before investing in value stocks, research the company and gain insight into why the market is discounting it.

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

Watch This Before You Buy NBFC Stocks (Fast Profits Daily)

Dec 3, 2021

My view on NBFC stocks.

Charlie Munger: This is "Even Crazier" than the Dotcom Era (Views On News)

Dec 3, 2021

Is the investing legend's pessimistic view on the stock markets justified?

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Dec 3, 2021 (Close)

MARKET STATS