Markets likely to go up further

With govt appointing committee on MAT, FIIs are expected to turn net buyers now

Opened with a gain of 479 points, corrected by 50 points a day later, plunged by 723 points in the middle, eased further by 118 points on a day before the last and again jumped by 506 points on the last day is how BSE Sensex had a roller coaster ride last week. However, it closed higher by 94 points on the weekly basis.

With the last week's gain, though a paltry one, the premier market barometer snapped the devastating downtrend that had gripped the Indian stock markets for the past three weeks. The markets commenced the week with a bang, ending the first trading day with a whopping gain of 479 points. On Tuesday, Sensex shed nearly 50 points on profit booking. The third trading day turned out to be an unexpectedly inauspicious one as the foreign institutional investors (FIIs) unloaded heavily on global cues.

On Wednesday, the index plunged on account of weakening rupee and disappointing corporate numbers. But after a minor erosion on Thursday that took away yet another 118 points from the Sensex, Friday turned out to be a good one for the markets as on one hand, the international markets jumped up and on the other hand Finance Minister Arun Jaitley came out with an assurance that he would set up a committee to find ways of resolving the minimum alternative tax (MAT) imbroglio.

Ever since the issue of MAT cropped up, the FIIs have been consistent sellers in the Indian stock markets. But it was thanks to the constant buying support extended by the domestic institutional investors (DIIs) that the markets did not go further down. Interestingly, these very DIIs were consistent sellers when FIIs were on buying spree earlier. Since the markets stopped going further down, the lowest level of the last week on the BSE Sensex might not get broken in the days to come.

Besides, the last week's lowest level of 26424 is only slightly lower than the previous support level of 26469 reached on December 17, 2014, thus forming a double bottom pattern on the daily chart. But, it was not very strong with second bottom being lower than the first one. However, with significant correction in majority of stocks and a likely change in the issue of MAT, the FIIs might stop selling the way they did in the recent past. So, a further rise is likely this week.

With the Parliament's Budget session set to end on Wednesday, whatever positive decisions taken by it would start showing on the markets. Reserve Bank of India is scheduled to hold its bi-monthly policy review on June 2, and expected to come out with an interest rate cut of 25 basis points. But with the inflation being under check, there is a possibility that RBI may surprise markets with rate cut even before meeting.

Thus, the markets have nearly completed a correction phase and are more likely to get ready for yet another round of a bull phase, which may not be as strong and as big as the preceding one that ended after taking the Sensex to its life-time high of 30025 recently, but would still provide opportunity of buying stocks that are selling below their intrinsic values.

For those investors who weren't able to buy stocks they wanted last year due to steep one-way move, the current market provides opportunity worth exploring as the recent fall in the markets was due mainly to selling by FIIs and also short-term traders. The FIIs are the most timid investor class and they have a horse sense that makes them jump up and run away even with a slightest hint of danger. But they also are a class of investors that pump in lots of money if they find safety and potentiality.

Renowned stock market experts say the Indian stock markets will be one of the safest and the most promising ones going forward and that is why, the FIIs are also expected to change their stance and turn net buyers from now. Thus, the market correction is a golden opportunity to pick up shares that have gone down and available at reasonably low prices.