Buy on dips in the market

Buy on dips in the market
Highlights

Seasonal buoyancy is expected to set in from mid-July The ebullient mood that was built up due to...

Seasonal buoyancy is expected to set in from mid-July The ebullient mood that was built up due to sustained five week-long rally in the Indian stock markets came to an abrupt end when the news turned suddenly negative from all the fronts. When the markets closed the previous week, the fifth one in a row that witnessed prices of stocks rising, the BSE Sensex at its close of 20286 was up by a whopping 2044 points when compared with the closing of 18243 six weeks ago. The Sensex also scaled to a new high of the 31 months during the course of the winning streak. The benchmark index also reached a recent new high of 20444 only on Monday last week as the previously prevailing ebullient mood percolated in the week that was.
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However, after reaching this current new high, the markets suddenly started losing ground and the BSE Sensex was sliced off precious 611 points in just first four trading sessions ended Thursday. Friday was the only day when the markets closed in the plus territory but the gain attained by the Sensex was just a meagre 30 points. Therefore the net loss that the BSE Sensex suffered during the week was a significant 582 points. Since the markets had been going up unabatedly in the last five weeks, a technical correction was on the cards. And it happened after the markets reached a 31-month new high of 20444 on Monday itself. The share brokers received more orders for selling than for buying post the recent new peak. Thus, the downward journey commenced. The slide became faster and wider when the news from overseas markets started to be disturbing. The American Federal Reserve chairman Ben Bernanke was reported as saying that since the American economy was on the recovery path, stimulus packages would be gradually withdrawn. At the same time, the purchase managers' index in China turned out to be worrisome and caused a debacle in the East Asian stock markets. Both, the Dow Jones and Shanghai stock market indices dropped significantly down and the Japanese Nikkei fell head-long. As if this was not enough, the rupee value in the international currency market dropped to a six months' low and a few leading Indian companies like State Bank of India, Larsen & Toubro and BHEL came out with lesser than expected numbers for the quarter ended March and a company like Tata Steel even reported a huge and unprecedented loss. All these negative factors took their toll on the Indian stock markets. Amidst multiple negative factors and adverse news, there was some good news too. It was in the nature of onset of the monsoon in Kerala, which meant that monsoon has begun on time this year and the same would spread well over the nation by July 15, as forecast by the weather bureau experts. Union Finance Minister P Chidambaram too came out with assurances that the investors must not sell on the news from the other nations and base their investment decisions on the fundamentals of their own nation. He also assured that the second quarter ending June, 2013, would be a much better one as the economy was already on a recovery path. The FM also promised investors that economic reforms process would be taken up shortly and that would better the economy to fructify desired results. The stock market investors, who turned panicky due to various negative factors and news, may now stop selling further and help the markets stabilize initially at the current price levels in the new week. Given the assurances of the Finance Minister and the potential recovery in the economy along with the expectations of normal rains, seasonal buoyancy is expected to set in from mid-July. Investors are advised not to sell in a panic mode and in fact advised to buy on dips in the market. The investors with a long term view will definitely be rewarded for their patience and perseverance.
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