Bullish trend to continue

Cement, banking stocks are best bet for long-term investments as Centre is set to take up massive infra projects

The Indian stock market indices ended the week with marginal gains despite initial concerns over a likely interest rate hike in the US. Also, the ruling BJP's poor performance in the by polls impacted the market sentiments negatively. However, the mood of the markets perked up after the Federal Reserve board retained its earlier stance of keeping interest rate historically low near zero per cent for a considerable time sparking a rally in equity markets globally and sent the Sensex move up above 27K mark.

The stock markets witnessed huge volatility last week. The Sensex which had closed at 27061 with a weekly gain of only 34 points at the end of the previous week opened slightly lower at 26998. It started going down on increased offerings from both individual and institutional investors alike, plunging to a low of 26464 on Tuesday itself. The benchmark index, at that low, was down by 597 points. However, the subsequent recovery transformed into a major rally as fears of interest rate hike in the US was done away with following Fed announcement to maintain status quo. This provided a great relief to the global stock markets which had been headed downwards for the fear of interest rate hike calendar-wise. So, the Indian stock markets also rallied by 648 points from Tuesday's low and thus notched fresh gain of 51 points over its previous week's closing at the end of the fourth trading day on Thursday.

On Friday, the markets, however, suffered a loss of 22 points mainly on the week end followed by the expiry of the September series of futures and options contracts in the in the next week which would be immediately followed by the Prime Minister Narendra Modi's US visit and also the bi-monthly monetary policy review by the Reserve Bank which has already indicated that the interest rate would not be cut this time too.

The Sensex therefore ended the week with a paltry gain of 29 points and thereby maintained its upward momentum, but only at a dwindling pace. Since the markets have already discounted whatever good and positive factors that have emerged and seen in the recent past, they would certainly require a fresh flow of positive news if they have to maintain above 27,000-mark. Besides, October, a month that has proved to be inauspicious for the stock markets globally and also for the Indian ones more often, is fast approaching. The market observers are therefore advising investors to remain optimistic but only cautiously and not buy shares just impulsively.

Currently, it is ‘shraddh paksha’ for Hindus and therefore, many Hindu investors are not even buying shares. They are expected to return to the markets once this inauspicious period gets over from the first day of the Navratra. Almost at the same time, the second quarter corporate numbers would begin. With the higher advance income tax payment numbers showing a rise of around 15 to 19 per cent, the flow of the corporate numbers could turn out to be positive. Besides, the Prime Minister will have returned from his visit to the US and bring in more positive news by that time. Therefore, there is a possibility that Sensex which has closed the last week at 27090 and remained only 266 points below its life-time high would set new records this time in October and make this month an auspicious one.

Since the long-term trend has remained strongly bullish, many worthless scrips are also likely to go up or show uptrend but discerning investors should be extra-cautious in buying such scrips having little or no merits or have already appreciated much beyond their fundamentals to justify their prices. In the next few months, and perhaps a few years, demand for cement is going to pick up due to revival in construction industry and government's plans to take up ambitious infrastructure projects. With a boost to the housing industry and also revival in the general business sentiments, banking and paints manufacturing companies are also likely to witness humming business activities. Investors are therefore suggested to pick up stocks from amongst these segments for medium to long-term holding.