Marginal uptrend likely

The BSE Sensex hit a new high of 28126, but closed with a paltry gain of 178 points mainly due to sustained selling by the domestic institutional investors (DIIs). The foreign institutional investors (FIIs) however remained net buyers, but failed to lift prices of pivotals and forward group equities up. Meanwhile small and marginal investors were on a mopping up spree, preferring to go after low-priced and second rung small and mid-cap scrips. Therefore, Sensex which based mainly on leading 30 scrips could not display the mood of the markets the way it should have.

The Dow Jones Industrial Average, popular as Dow, and the Nikkei of Tokyo Stock Exchange climbed to new highs during the week while data pertaining to inflation and growth in industrial activity in India turned out to be in favour of a bullish trend.

After a fall in the retail inflation, it was the wholesale inflation number that reached a five-year low of 1.8 per cent in October, thus firming up a belief that the Reserve Bank of India in its ensuing review meeting scheduled for December 2 will now have to soften lending rates. The periodic growth numbers in industrial activity announced a day before also turned out to be encouraging. The crude oil prices in the world markets softened further during the week and reached a four-year low. This enabled the government to announce an increase of Rs 1.50 in excise duty per litre of petrol and diesel and thus attempted to lower budgetary deficit to an extent of Rs 13,000 crore, which yet another positive factor for the bourses.

Even despite all these and major bullish factors, the markets could gain only 178 points over its previous week's closing due mainly to sustained selling pressure from the DIIs and also because of weakening of the rupee against the greenback. The value of the rupee further declined to around Rs 61.7 per dollar and was feared to fall further to Rs 62 in the wake of increase gold imports.

So, despite all the positive factors, the markets might not rule strong this week because a weakened rupee impact buying trend of the FIIs, at least for the time being. The markets could therefore be expected to remain positive but the net gains may likely to be marginal.

The Lok Sabha session is also on and many bills pertaining to economic reforms are likely to be presented before the house for passing and therefore, the markets would eagerly await the outcome of the same. If major and important bills pertaining to labour, land acquisition, etc., get approval, then the markets could rise substantially. Otherwise, they will fluctuate and end the week either in the green or red with marginal changes.

The long-term primary phase in the Indian stock markets has turned bullish ever since they bottomed out in August, 2013. With the Modi government assuming office five months ago, the hopes of revival of the economic reforms have become strong and the steps that the government has been taking are giving credence to such hopes too. But major reforms like GST and others are still pending and discerning investors would certainly like to wait till such steps are actually taken. Till then, it would be really a crucial time for the markets as they have already gone up and reached levels that are practically called danger-zone levels. Investors are, therefore, advised to tread highly cautiously while making investment decisions, and buy only blue chip stocks if they think they must, and that too, at times when markets are faced with technical corrections. Buying low- priced and low- grade stocks without specific and strong reasons might result in financial disaster if not sold while they continue to go up after such buying.

In the meantime, seeing the gullible investors thronging the markets for buying shares, the professional manipulators have started to play their old practice of inducing them with positive propaganda for companies that are really not worth buying. Presently, such game plan is going on in GS Auto, Chartered Logistics and IOL Chemicals as positive rumours are being spread about them. Investors should not fall into such traps.