Hold on to good stock

Time for reshuffling portfolios; move to blue-chips Markets are expected to remain positive in the next few weeks and fundamentally good scrips are most likely to jump, whenever the adverse factors are done away with either by the govt or automatically in natural process The Sensex continued to rally in the fourth week straight. However, the net gain was just 191 points over the previous week's closing. They were away from trading because of uncertainties pertaining to a host of issues including the value of the rupee and steps being taken by the RBI to contain further erosion in the Indian currency. Also, they were scared by predictions of lower GDP rate. It was only the good progress of the monsoon and positive corporate numbers in the last week helped a few select shares and kept the benchmark index afloat around 20,000-mark. When the markets opened for trading on last Monday, the news was not very positive either from the global or domestic. The Sensex which had closed in the previous week at 19,958, opened slightly lower at 19,926 and receded to the week's low of 19,650 by Tuesday, the very next day RBI hiking interest rate by two percentage points on very short term inter-banking fund transfers. The Govt opened up more sectors for FDI and also enhanced limits in already opened sectors. However none of the steps, either by the RBI or the govt, could instill confidence in the minds of the marginal and small investors. The govt's action failed to arrest downfall in the rupee as well as the stock markets, only because the Reserve Bank came out with an announcement of hiking interest rate to be charged in the inter-bank transactions that take place every day but only for a short while, say, for a day or two, to accommodate larger fund requirements. The RBI's action of raising interest rate on inter-bank fund transfers was initially taken as a pre-runner of the apex bank of extending its rigid policy of not softening of interest rates in its review meeting scheduled to be held on 30th July. However, when it was made clear that the monetary policy and the interim steps aimed at curbing speculation in the forex markets were totally different issues, the market men decided to revisit the markets which not only helped the earlier losses being recouped but also make the Sensex surface above 20K mark. Thus, the markets have appreciated by 754 points so far in the month of July, a month of the beginning of the seasonal buoyancy. The monsoon, so far, is very good and the same is expected to remain during the rest of the season. The corporate numbers as announced so far are also generally positive for the markets. However, the apex bank may not cut the interest rate in its July 30 review meeting as the rupee is still weak in the foreign currency market but still the markets may not get hurt because this will be the last monetary policy review meet under the present governor D Subbarao, who has inflation as the top priority on agenda. The mid-September review of the monetary policy would take place under the new governor. In the meantime, the markets will be taken care of by the dividend income flows in the hands of the investors as most companies pay their final dividends during July to September period. The additional money in the hands of investors mean there is either more fund flow to the stock markets or more consumption of produced goods. In either case the main gainer would be the stock markets. Therefore, the markets are expected to remain positive in the next few weeks and fundamentally good ones are most likely to jump, whenever the adverse factors are done away with either by the govt or automatically in natural processing. The investors are therefore suggested that they should hold on to their investments in really good company shares and buy more with the help of the dividend incomes that has already commenced in their hands from a few companies. The investors can also reshuffle their portfolios by shunning low grade shares with blue-chips or promising ones before they go up.