Subdued markets likely

Long-term investors should not get panicky and sell as markets are falling on account of technical correction

The Indian stock markets posted best gains in three weeks on last Thursday following the news that the US's Federal Reserve decided to not increase interest rate hurriedly. But they fell head-long on Friday, the last trading day of the week, on wide-spread sell-off in global stock bourses on growth worries. The BSE Sensex that had jumped by as many as 390 points on Thursday shed 340 points on the following day. Overall, the Sensex ended the four-day-long week with a net loss of 271 points. Thus it turned out to be a third week in a row to have lost after it reached its life-time high of 27355 on September 8.

After having enjoyed a five-day-long week-end mini vacation ended on Monday of the last week, the stock market investors and operators returned to play afresh the buying-selling game on Tuesday still under the hang-over impact of the sustained downtrend in the preceding two weeks and therefore, they treaded highly cautiously as the news from the overseas stock markets had continued to be worrying and implying recessionary trends deepening in some of the European nations.

Even the news from the world's largest economy, the US, was not positive at the previous week-end. Therefore, after opening lower at 26488 on Tuesday, against the previous week's closing of 26568, the Sensex started its descent and reached a low of 26150 as on Wednesday.

On Thursday, however, the global markets including those of India staged a massive upmove on the news that the minutes of the US's Federal Reserve Board's meeting held during the middle of September, did not contain anything that suggested that an interest rate hike would be announced in a hurry.

However, Friday turned out to be a disastrous day not only for Indian stock markets but also for all the global ones The global markets took the hit on the news that Germany, the Europe's strongest economy thus far, was also falling in line with its peers and suffered a setback in its industrial activity. The Chinese stocks suffered massive losses for deepening recessionary trends and also unrest in Hong Kong arising out of pro-democracy agitation by students. Unfortunately, the IIP numbers for the month of August turned out to be dismaying in India.

The softening world crude oil prices did not provide any relief to the global stock markets including those of India as the fall in the globally consumed fuel was due mainly to low off-take resulting out of slowing demand subsequent upon industrial recession. The IT major Infosys Technologies's better than expected second quarter results, too, failed to lift the markets the way they are known to. The only help that the markets could get from the IT major's excellent working results and an issue of a free scrip against each held by its shareholders was it saved the markets from falling too much in line with their world peers.

Thus, the markets have continued to lose even when the biggest Indian festival of Diwali was just a few weeks away. A large section of the market experts is now of the opinion that the mood during the Diwali days would also remain subdued as no immediate relief is expected from the global markets.

But there are many experts who believe that the current fall in the Indian stock markets is more of a technical nature and they would soon return to their upgoing path as slowly but steadily the Indian economy is getting better and better. Therefore, after an initial lull, the markets could be expected to hum with increasing buying support and might remain upbeat around Diwali time. The major boost, however, would be a few months away, may be when the Union budget comes closer as it would be the first full-fledged budget by the new government.

The long term investors are therefore advised not to sell under the impact of panic and instead nurture courage to pick up shares of oil marketing and paint manufacturing companies as these would be the ones to benefit the most from the softened crude oil prices.