Bullish trend on the cards

Selling pressure on the shares is likely to be lowest as most of the companies are expected to declare dividends in coming weeks

As gauged by the BSE Sensex, the Indian stock markets decline for the third week in a row but when judged with the breadth of the market, they still performed bullish. The Sensex lost only six points whereas the number of scrips that gained over their previous week's closings far exceeded the number of those which end the week lower. Given the critically adverse conditions the economy is facing, the performance of the Sensex could be considered as bullish. Although, the 30-scrips based Sensex fell below the 25K-mark only briefly, it managed to bounce back, and closed at 25100.

The economy continued to receive jerks as crude oil prices remained stuck to the recent new high, owing to internal strife in Iraq, a leading crude oil producer in the world. The onion and fresh vegetable prices flared up due to scanty or no rains in the producing areas. Even the Railways hiked passenger fares and goods freights and thereby added fuel to the fire leading to a possibility of an interest rate hike by the Reserve Bank when its board meets to review monetary policy most likely on July 2. The markets did not receive major positive news from foreign countries last week.

All these and other factors being negative for the markets, they could have forced prices of stocks as well as the indices to fall significantly down last week as the monsoon rains also continued to remain elusive with no signs of their early arrival in near future. But, the markets shrugged off these vagaries and registered a negligible loss of only six points at the end whereas a large number of scrips continued to perform bullish.

Such a strong undercurrent in the markets was based mainly on hopes. The Iraq crisis is expected to meet an end soon as the Iraq government which was on back foot against the terrorists so far, got prepared to retaliate with the help of the USA and other nations. If there is good news from Iraq, then the world crude oil market could be expected to cool down. The monsoon rains though elusive so far, are expected to arrive by July 7, as per the Met Department estimates. On July 10, the new Finance Minister Arun Jaitley will present his and his government's maiden budget. If the austerity and other dynamic steps initiated by the Modi government are of any indication, the Budget is expected to be a growth-oriented and a market-friendly one.

Currently, the year's most exciting season of annual meetings of the corporates is already on and is to gather momentum with the passage of time. The season of annual meets is very important and exciting for the investors for two very important facts. One, because it is during the annual meets that the chairmen and managing directors of the companies come face to face with their shareholders and therefore, make most of the positive announcements besides disclosing their growth plans. Moreover, immediately after such annual meetings, the companies start sending dividends to their shareholders. In these days of electronic transfers, the dividends are directly credited the very next day of the annual meetings. So, these are the days when the real long-term investors actually get rewarded for investing in and holding shares of the companies. Therefore selling pressure in shares during this period is generally the lowest. Thus, as it happens almost every year, the markets are most likely to get a further boost provided, Iraq issue cools down and, rains and the union budget are good for the markets.

In short, if everything is normal within a reasonable time, the markets could be expected to stage a post-budget rally. To toe with the likely post-budget rally, bourses will have to continue to maintain their upmove in the new week with more fundamentally strong scrips joining the band-wagon. Investors may pick up shares of the companies which have decent track record of bettering their financial performance in the past few years and have rewarded their shareholders with good or incremental dividend payouts.