Be Cautious on fresh investments
Sensex is unlikely to hover above 20k mark for longA With foreign investors pumping a massive $10 billion...
Sensex is unlikely to hover above 20k mark for longA
With foreign investors pumping a massive $10 billion in Indian stock markets during January-March, the second highest ever in a quarter, the FII ownership in top 500 companies has hit an all-time high of 21.2 per cent.
The FII and foreign promoters' holdings in the BSE-500 companies has thus surpassed the combined Indian promoters' holding. This prompted the Indian promoters rush for buying their own companies' shares to keep the management control in their hands. It was therefore due to this reason that a few select scrips rose significantly last week.
Besides, positive indicators from foreign stock markets also encouraged local bourses. A The American Dow Jones Industrial Average reached a level of 15,000 after a long interval. The Japanese Nikkei index was also reported to be on the upward trajectory.
Both American and Japanese economies were reported to be on recovery path, albeit at a slow pace. A Back home, the Karnataka poll outcome too extended a helpful hand to the stock markets last week as the markets rightly or wrongly believed that Congress is a party under whose regime stock markets can rise significantly.
The BSE Sensex which had earlier scaled to a high of 20204 on January 29this year had then plunged to a low of 18144 on April 15 and thereby lost 2059 points in 52 working days. However, from the low of 18144 the Sensex took only 16 working days to reach a high of 20119 on Friday last week and in the process gained 1975 points.
The swift and significant jump in the Sensex has neither taken more than half of the listed stocks up with it nor attracted more people to rush for buying stocks. The laggards may join the market rally only if the economy improves from the present state of stagnation and buyers will rush only if the high levels of the scrips that have been recently achieved are maintained for long.
Car sales in India declined significantly during April. In developing economies, car sales are viewed upon with the state of the economic growth. However, a silverlining is seen in factory output numbers that suggest that five important industry segments have witnessed improvement in April.
In the meantime, the budget session of the parliament is over without transacting much of the business it was supposed to, except passing the Railway and the Union budget and a couple of other important bills. Many other important bills like land requisition and food security have been left lingering.
This is a setback to the economy and also to the ruling UPA.A The Sensex has scaled to a crucial 20K mark, a level that earlier also did not hold for long and this time it has lesser support from the economy or the numbers and therefore, more cautious approach is required to be adopted especially for making fresh investment decisions.